EconStor >
Scienpress Ltd, London >
Journal of Applied Finance & Banking >

Please use this identifier to cite or link to this item:
Title:The stock selection problem: Is the stock selection approach more important than the optimization method? Evidence from the Danish stock market PDF Logo
Authors:Grobys, Klaus
Issue Date:2011
Citation:[Journal:] Journal of Applied Finance & Banking [ISSN:] 1792-6599 [Volume:] 1 [Year:] 2011 [Issue:] 1 [Pages:] 143-162
Abstract:Passive investment strategies basically aim to replicate an underlying benchmark. Thereby, the management usually selects a subset of stocks being employed in the optimization procedure. Apart from the optimization procedure, the stock selection approach determines the stock portfolios' out-of-sample performance. The empirical study here takes into account the Danish stock market from 2000-2010 and gives evidence that stock portfolios including small companies' stocks being estimated via cointegration optimization methods are most beneficial. Only the stock portfolios exhibiting the lowest initial market capitalization corresponding to 29.51% showed a Sharpe ratio of 0.4545 and 0.4824, respectively, being higher than the stock market's Sharpe ratio of 0.4451 concerning the out-of-sample period running from 2003-2010.
Subjects:stock selection
optimization procedure
quasi-maximum-likelihood estimation
Document Type:Article
Appears in Collections:Journal of Applied Finance & Banking

Files in This Item:
File Description SizeFormat
665969201.pdf148.65 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.