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- Title
Seeking Alpha? It's a Bad Guideline for Portfolio Optimization.
- Authors
LEVY, MOSHE; ROLL, RICHARD
- Abstract
The article examines increase in a portfolio's Sharpe ratio when adjusted in the direction of the alpha vector, and compares it with the optimal adjustment. Topics discussed include use of a benchmark portfolio such as value-weighted portfolio for the analysis, no significant association between alphas and optimal shift in the portfolio weights, and no role of alphas in portfolio optimization.
- Subjects
INVESTMENTS; ALPHA coefficient (Finance); BENCHMARKING (Management); VECTORS (Calculus); MATHEMATICAL optimization
- Publication
Journal of Portfolio Management, 2016, Vol 42, Issue 5, p107
- ISSN
0095-4918
- Publication type
Article
- DOI
10.3905/jpm.2016.42.5.107