Toward the Design of Better Equity Benchmarks

  title={Toward the Design of Better Equity Benchmarks},
  author={Lionel Martellini},
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 analyzes the implications, in terms of design, for improved equity benchmarks. The author finds that maximum Sharpe ratio portfolios are consistent with such expected return proxies and, if built upon improved estimates of the correlation parameters, will significantly outperform market cap–weighted… 

Towards the Estimation of an Efficient Benchmark Portfolio: The Case of Croatian Emerging Market

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Risk-Based Asset Allocation: A New Answer to an Old Question?

  • Wai Lee
  • Economics
    The Journal of Portfolio Management
  • 2011
In recent years, we have witnessed an alarmingly large and growing amount of literature on portfolio construction approaches focused on risks and diversification rather than on estimating expected

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In the presence of nonnormally distributed asset returns, optimal portfolio selection techniques require estimates for variance-covariance parameters, along with estimates for higher-order moments

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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

Fundamental Indexation

A trillion-dollar industry is based on investing in or benchmarking to capitalization-weighted indexes, even though the finance literature rejects the mean–variance efficiency of such indexes. This

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Although investors are concerned foremost with mean and variance, they are also sensitive to downside risk. In this article we employ several risk variables of traditional and downside risk measures