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September, 2019
- ISIDORE Id: 10670/1.74a43e...
- hal: hal-02510242
- doi: 10.1016/j.intfin.2019.04.004
- PII: S1042-4431(19)30075-7
HALSHS : archive ouverte en Sciences de l’Homme et de la Société - notices sans texte intégral
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info:eu-repo/semantics/altIdentifier/doi/10.1016/j.intfin.2019.04.004
http://creativecommons.org/licenses/by-nc/ , info:eu-repo/semantics/OpenAccess
Keywords
Asset management Portfolio choice Investment horizons Investor and market sentiment Fund performance Signal processingSimilar subjects
Scrip Investment securities Securities law Capitalization (Finance) Blue sky laws Securities--Law and legislation Portfolio Underwriting Investing Investment management PortfolioCite this document
Deniz Erdemlioglu et al., « Long-term asset allocation, risk tolerance and market sentiment », HALSHS : archive ouverte en Sciences de l’Homme et de la Société - notices sans texte intégral, ID : 10.1016/j.intfin.2019.04.004
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Abstract
This paper studies optimal equity portfolios with long-term horizon under heterogeneous risk aversion levels. We focus on European stocks and empirically show that contemporaneous excess returns of semi-active strategies are negatively associated with market conditions and sentiment. Consistent with our long-horizon perspective, we find that the effects of sentiment measures on semi-active portfolio returns are sizeable and economically relevant, particularly in bull (post-crisis) periods, even after controlling for the five Fama-French factors, momentum, macro indicators and political uncertainty shocks either globally or country-wise. By contrast, the effects of sentiment measures on the passive (benchmark) portfolio appear to be negligible. The results further indicate that realized portfolio returns generated from our long-term strategies are considerably resilient to the episodes of flight-to-safety (risk-off) regimes.
