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Simple rules or optimization for a dollar-neutral investor?

Seyedi, Faraz; Gromstad, Haakon
Master thesis
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URI
http://hdl.handle.net/11250/2578517
Date
2018
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  • Master of Science [1117]
Abstract
In this thesis, we study portfolio construction and asset allocation for a long/short

investor. We construct equally weighted portfolios based on known firm

characteristics and compare these to mean-variance optimization models in two

different datasets. We find that high turnover and estimation error diminish the

effects of optimization after transaction costs. Simple median-based 1/N strategies

are not necessarily optimal, but all strategies manage to outperform mean-variance

models in the sample consisting of a larger number of assets. Further, the medianbased

1/N strategies we consider could be used as potential benchmarks for active

characteristic-based strategies.
Description
Masteroppgave(MSc) in Master of Science in Business, Finance - Handelshøyskolen BI, 2018
Publisher
Handelshøyskolen BI

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