The GUTMANN CENTER FOR PORTFOLIO MANAGEMENT
at the University of Vienna
http://www.gutmann-center.at
is pleased to announce the following PUBLIC LECTURE:
- Apologies for any cross-postings!! -
Date: October 13th, 2004 (Wednesday), 4.00 p.m.
Speaker: Prof. Dr. Raman UPPAL
London Business School
http://faculty.london.edu/ruppal/
Title: "Portfolio Selection with Parameter and Model
Uncertainty"
Abstract:
In this paper, we extend the mean-variance portfolio model where
expected returns are obtained using maximum likelihood
estimation to explicitly account for uncertainty about estimated
expected returns. In contrast to the Bayesian approach to
estimation error, where there is only a single prior and the
investor is neutral to uncertainty, we allow for multiple priors
and aversion to uncertainty. The multi-prior model has several
attractive features: One, just like the Bayesian model, the
multi-prior model is firmly grounded in decision theory; Two, it
is flexible enough to allow for uncertainty about expected
returns estimated jointly for all assets or different levels of
uncertainty about expected returns for different subsets of the
assets; Three, we show how in several special cases of the
multi-prior model one can obtain closed-form expressions for the
optimal portfolio, which can be interpreted as a shrinkage of
the mean-variance portfolio towards either he risk-free asset or
the minimum variance portfolio. We illustrate how to implement
the multi-prior model using both international and domestic
data. Our analysis suggests that allowing for parameter
uncertainty reduces the fluctuation of portfolio weights over
time and, for the data set considered, improves substantially
the out-of sample performance.
Location: Bank Gutmann AG (http://www.gutmann.at),
Schwarzenbergplatz 16, A - 1010 Vienna,
Austria
Participation is free, but REGISTRATION required:
brigitte.juchelka(a)gutmann.at
phone: +43-1-50220-357
Further information:
Dorothea Grimm
Administrative Director
Gutmann Center for Portfolio Management
University of Vienna
Bruenner Str. 72
A-1210 Wien
Austria
phone: +43-1-4277-38186
fax: +43-1-4277-38074
mail: dorothea.grimm(a)univie.ac.at
web: www.gutmann-center.at