Seminar Details

Seminar Details


Feb 3

3:30 pm

The Efficient Use of Conditioning Information in Portfolios

Wayne Ferson & Andy Siegel


University of Washington - Department of Finance

We provide solutions to the problem "How are mean-variance efficient portfolios formed in the presence of conditioning information?" The unconditional minimum-variance portfolio weights are derived in closed form. Our solutions attain the smallest unconditional variance, for a given unconditional mean, among all possible dynamic strategies that may use the conditioning information. We provide solutions for n risky assets, either with or without a riskless asset. We illustrate the properties of the optimal strategies and some applications of the results. One application refines the Hansen-Jagannathan (1991) bounds on stochastic discount factors.