The efficient market inefficiency of capitalization–weighted stock portfolios

@inproceedings{Haugen1991TheEM,
  title={The efficient market inefficiency of capitalization–weighted stock portfolios},
  author={Robert A. Haugen and Nardin L. Baker},
  year={1991}
}
35 A s of the end of 1990, the largest 200 prehensive cap-weighted portfolios occupy positions defined-benefit pension plans had indexed a combined total of approximately $200 billion to capitalization-weighted stock portfolios, such as the Wilshire 5000. The sponsors of these plans presumably return. E: believe this to be an efficient investment, in the inside the efficient set. In this context, theory directs us to manage risk in seeking out investment portfolios with the lowest possible… 

Figures from this paper

The Resale Value of Risk-Parity Equity Portfolios

This article examines the application of risk parity to fully diversify an equity portfolio. It presents wealth accumulation in a stochastic dominance framework, tested over increasing investment

Minimum Variance Portfolios in the German Stock Market

The text demonstrates out-of-sample performances of minimum variance portfolios in the German stock market in the period 2002-2015. Because of two huge drawdowns on equity markets in the period

Minimum-Variance Portfolios in the U.S. Equity Market

In the minimum-variance portfolio, far to the left on the efficient frontier, security weights are independent of expected security returns. Portfolios can be constructed using only the estimated

The Performance of Minimum Variance Portfolios in the Baltic Equity Markets

This paper applies minimum variance portfolio optimization to the Baltic equity markets and describes the out-of-sample performance of the optimized portfolios. The sample covariance matrix enhanced

The “Efficient Index” and Prediction of Portfolio Variance

Haugen and Baker [1990]) is that the market portfolio will not be efficient because of taxes, restrictions on short-selling, heterogeneous expectations, and opportunity sets that differ across

Toward the Design of Better Equity Benchmarks

Following recent research on the relevance of idiosyncratic risk in asset pricing models, the author proposes using total volatility as a model-free estimate of a stock's excess expected return and

Industry-Based Alternative Equity Indices

The authors examined five alternative equity indices (AEIs) in the United States using industries instead of individual stocks as building blocks to form portfolios and compared their performance

Building Efficient Portfolios Sensitive to Market Volatility

This paper builds relatively efficient diversified portfolios that are sensitive to cross-sectional return dispersion (RD). A two-factor model based on Black's zero-beta CAPM is developed to measure

When Should Investors Choose an Alternative to Passively Investing in a Capitalization-Weighted Index?

We present a framework for deciding when to choose an alternative to passively investing in capitalization-weighted indices within any particular asset class. Five reasons are identified for seeking

Dynamic factor portfolios in the Norwegian stock market

We test how dynamic factor portfolios utilizing acknowledged market anomalies perform on Oslo Stock Exchange in the period 1998 to 2015. The individual factor portfolios have varying performance over
...

References

SHOWING 1-2 OF 2 REFERENCES

A finite algorithm to maximize certain pseudoconcave functions on polytopes

TLDR
An algorithm that finds the exact maximum of certain nonlinear functions on polytopes by performing a finite number of logical and arithmetic operations by selectively decomposing the feasible set into simplices of varying dimensions is developed and proves.

Foundations of Finasce

  • New York: Basic Books,
  • 1976