Onur Yorulmaz, Asset Pricing: Multifactor Models versus Higher Order CAPM in the Swiss Stock Market, University of Zurich, Faculty of Business, Economics and Informatics, 2016. (Master's Thesis)
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Lea Stettler, Portfoliooptimierung unter zusätzlichen Nebenbedingungen, University of Zurich, Faculty of Business, Economics and Informatics, 2016. (Bachelor's Thesis)
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Groh Christoph, Stromhandel in der Schweiz und in benachbarten Ländern - Analyse von Angebot und Nachfrage unter Benutzung eines Marktmodells, University of Zurich, Faculty of Business, Economics and Informatics, 2016. (Master's Thesis)
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Gregor Philipp Reich, Divide and Conquer: Recursive Likelihood Function Integration for Hidden Markov Models with Continuous Latent Variables, In: 69th Econometric Society European meetings. 2016. (Conference Presentation)
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Fabian Ackermann, Walt Pohl, Karl Schmedders, Optimal and Naive Diversification in Currency Markets, Management Science, Vol. 63 (10), 2016. (Journal Article)
DeMiguel et al. [DeMiguel V, Garlappi L, Uppal R (2009) Optimal versus naïve diversification: How inefficient is the 1/N portfolio strategy? Rev. Financial Stud. 22(5):1915–1953] showed that in the stock market, it is difficult for an optimized portfolio constructed using mean-variance analysis to outperform a simple, equally weighted portfolio because of estimation error. In this paper, we demonstrate that portfolio optimization can be made to work in currency markets. The key difference between the two settings is that in currency markets interest rates provide a predictor of future returns that is free of estimation error, which permits the application of mean-variance analysis. We show that over the last 26 years, a mean-variance efficient portfolio constructed in this fashion has a Sharpe ratio of 0.91, versus only 0.15 for the equally weighted portfolio. We also consider the practical implementation of this strategy. |
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Karl Schmedders, Ole Wilms, Walter Pohl, Asset prices with non-permanent shocks to consumption, Journal of Economic Dynamics and Control, Vol. 69, 2016. (Journal Article)
Most standard asset-pricing models assume that all shocks to consumption are permanent. We relax this assumption and allow also for non-permanent shocks. In our specification, the long-run mean of consumption growth is constant; consumption levels are subject to short-run deviations from their long-run trend. The implications of our model are dramatically different from those obtained in the prior literature. A canonical and parsimonious asset pricing model with CRRA preferences and non-permanent shocks can reproduce the equity premium, high return volatility and return predictability with a coefficient of relative risk aversion below ten. This finding suggests that non-permanent shocks can play an important role in explaining asset pricing puzzles. |
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Andy Egger, Supplementation of Missing Data in Real Estate Inquiries: A Self-Organizing Map Approach, University of Zurich, Faculty of Business, Economics and Informatics, 2016. (Master's Thesis)
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Joris Klaus, Challenging des Best-In-Class-Ansatzes bei der Selektion von aktiv gemanagten Fonds, University of Zurich, Faculty of Business, Economics and Informatics, 2016. (Master's Thesis)
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Philip Kreis, Entrepreneurial Opportunity and Economic Crisis, University of Zurich, Faculty of Business, Economics and Informatics, 2016. (Master's Thesis)
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Nicolas Kilchenmann, Applications of Linear Programming in Financial Portfolio Selection, University of Zurich, Faculty of Business, Economics and Informatics, 2016. (Bachelor's Thesis)
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Karl Schmedders, Walter Edward Pohl, Asset Pricing with Heterogeneous Agents and Long-Run Risk, In: SITE Workshop on Computational Methods for Dynamic Economies and Games, 2016. (Conference or Workshop Paper published in Proceedings)
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Walter Edward Pohl, Karl Schmedders, Ole Wilms, Recursive Preferences, Agent Heterogeneity and Wealth Dynamics, In: World Finance Conference. 2016. (Conference Presentation)
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Gregor Philipp Reich, Divide and Conquer: Recursive Likelihood Function Integration for Hidden Markov Models with Continuous Latent Variables, In: Structural Estimation and Optimization: a Conference in memory of Che-Lin Su. 2016. (Conference Presentation)
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Maximilian Adelmann, An Improvement of the Global Minimum Variance Portfolio using a Black-Litterman Approach, In: World Finance Conference 2016. 2016. (Conference Presentation)
Asset management companies are constantly searching for portfolio optimization models that are on the one hand clear and intuitive and on the other provide high and reliable returns. This paper presents a modifed
version of the well-known Black-Litterman portfolio optimization approach. Unlike in the original model, the intuitive global minimum variance portfolio serves as the reference portfolio. The introduction of a general rule
for investors' views in combination with a simplification of the original Black-Litterman approach facilitates
the implementation of the model and enables us to remove so-called dead assets from the GMV portfolio. As an additional advantageous feature our model is only based on variance-covariance estimations, and relative
return estimations for our general rule. A numerical application of our modified Black-Litterman model to empirical data sets demonstrates that portfolios based on the model clearly outperform the GMV portfolio
and the 1=N portfolio in terms of compound annual returns and Sharpe ratios. |
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Maximilian Adelmann, An Improvement of the Global Minimum Variance Portfolio using a Black-Litterman Approach, In: ICE 2016. 2016. (Conference Presentation)
Asset management companies are constantly searching for portfolio optimization models that are on the one hand clear and intuitive and on the other provide high and reliable returns. This paper presents a modifed version of the well-known Black-Litterman portfolio optimization approach. Unlike in the original model, the intuitive global minimum variance portfolio serves as the reference portfolio. The introduction of a general rule for investors' views in combination with a simplification of the original Black-Litterman approach facilitates the implementation of the model and enables us to remove so-called dead assets from the GMV portfolio. As an additional advantageous feature our model is only based on variance-covariance estimations, and relative return estimations for our general rule. A numerical application of our modified Black-Litterman model to empirical data sets demonstrates that portfolios based on the model clearly outperform the GMV portfolio and the 1=N portfolio in terms of compound annual returns and Sharpe ratios. |
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Michael Weibel, Anwendungen der Clusteranalyse in der Portfolio-Optimierung, University of Zurich, Faculty of Business, Economics and Informatics, 2016. (Bachelor's Thesis)
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Roger Böhler, Multiperiod mean-variance portfolio selection with transaction costs, University of Zurich, Faculty of Business, Economics and Informatics, 2016. (Master's Thesis)
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Walter Edward Pohl, Higher-Order Effects in Asset-Pricing Models with Long-Run Risks, In: Society for Economic Dynamics. 2016. (Conference Presentation)
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Gregor Philipp Reich, Divide and Conquer: Recursive Likelihood Function Integration for Hidden Markov Models with Continuous Latent Variables, In: SSRN, No. 2794884, 2016. (Working Paper)
This paper develops a method to efficiently estimate hidden Markov models with continuous latent variables using maximum likelihood estimation. To evaluate the (marginal) likelihood function, I decompose the integral over the unobserved state variables into a series of lower dimensional integrals, and recursively approximate them using numerical quadrature and interpolation. I show that this procedure has very favorable numerical properties:
First, the computational complexity grows linearly in time, which makes the integration over hundreds and thousands of periods well feasible.
Second, I prove that the numerical error is accumulated sub-linearly over time; consequently, using highly efficient and fast converging numerical quadrature and interpolation methods for low and medium dimensions, such as Gaussian quadrature and Chebyshev polynomials, the numerical error can be well controlled even for very large numbers of periods.
Lastly, I show that the numerical convergence rates of the quadrature and interpolation methods are preserved up to a factor of at least 0.5 under appropriate assumptions.
I apply this method to the bus engine replacement model of Rust: first, I verify the algorithm’s ability to recover the parameters in an extensive Monte Carlo study with simulated datasets; second, I estimate the model using the original dataset. |
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Vanessa Kummer, Maik Meusel, Optimal Pricing Based On Real Estate Demand Data, In: INFORMS 2016 International Conference. 2016. (Conference Presentation)
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