Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments June 10, 2021 erstellt
Beschreibung:
When assets' expected returns follow a factor structure subject to pricing errors, we show that the mean-variance portfolio can be used to obtain a set of implied factor risk premia. Contrary to the instability of the mean-variance asset portfolio, we show that such implied factor risk premia imply stable factor exposures. To translate factor exposures into asset weights, we propose an asset allocation methodology that targets such stable factor exposures. Our empirical results demonstrate that our "factor-targeted portfolios" exhibit higher Sharpe ratios than mean-variance and various risk-based allocation rules and are robust against pricing errors in expected returns