A portfolio perspective on the multitude of firm characteristics
Subject
Management Science and Operations
Publishing details
Social Sciences Research Network
Authors / Editors
DeMiquel V;Martin-Utrera A;Nogales FJ;Uppal R
Biographies
Publication Year
2017
Abstract
We investigate which characteristics matter jointly for an investor who cares not only about average returns but also about portfolio risk, transaction costs, and out-of-sample performance. We find only a small number of characteristics - six - are significant without transaction costs. With transaction costs, the number of significant characteristics increases to 15 because the trades in the underlying stocks required to rebalance different characteristics often net out. We show investors can identify combinations of characteristics with abnormal out-of-sample returns net of transaction costs that are not fully explained by the Fama and French (2015) and Hou, Xue, and Zhang (2014) factors.
Keywords
Anomalies; Risk; Transaction costs; Out of sample performance
Series
Social Sciences Research Network
Available on ECCH
No
