Title: Attributes and their Characteristic Portfolios
Abstract: The financial instruments, or in general the assets, of a portfolio have many kind of characteristics or attributes such as expected return, market capitalization, beta with respect to an index, membership in a certain economic sector, etc. If we denote a certain attribute by a i for asset i (having value V i ) then the exposure of a portfolio V (with weights w k for k = 1, … M) to this particular attribute is defined as $${a_V} \equiv \sum\limits_{k = 1}^M {{w_k}{a_k}} = {w^T}a$$ ((28.1)) where we have used the obvious notation aT = (a1, … a M ). If, for instance the characteristics a i are measures of how strongly the assets i = 1, …s M belong to the automotive industry then av is the exposure of the portfolio to the automotive industry. Another example: If the characteristics a i are the asset returns R i then the exposure a V is simply the portfolio return R V . From these examples one can already guess that characteristics (or attributes) are a very general and rather abstract concept with broad applications1.KeywordsOptimal PortfolioRisky AssetExcess ReturnSharpe RatioUnit ExposureThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
Publication Year: 2004
Publication Date: 2004-01-01
Language: en
Type: book-chapter
Indexed In: ['crossref']
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