Incorporating Economic Objectives into Bayesian Priors:Portfolio Choice Under Parameter Uncertainty

摘要：

Bayesian priors on model parameters often ignore the economic objectives at hand. This paper shows that this can be suboptimal, and proposes a way to allow priors to reflect the objective of maximizing an expected utility. Using monthly returns of the Fama-French 25 assets and their three factors from January 1965 to December 2004, we find that the objective-based priors out-perform alternative priors substantially, with annual certainty- equivalent gains of over 10％ in many cases. The better performance is present even in repeated sampling experiments, suggesting that objective-based Bayesian optimal portfolios are superior decision rules even judged by the classical statistical criterion.

作者: Jun Tu Guofu Zhou

作者单位: Guofu Zhou, Olin School of Business, Washington University, St. Louis, MO63130.

会议类型: 国际会议

会议名称: 2006年中国国际金融年会

会议地点: 西安

会议语种:英文

在线出版日期: 2006-07-17（万方平台首次上网日期，不代表论文的发表时间）