Portfolio Optimization Using Factor and Characteristic Models

• Main Authors: Kuo-Ling Cheng, 鄭國龍
• Other Authors: Pin-Huang Chou
• Format: Others
• Language: zh-TW
• Published: 2004
• Online Access: http://ndltd.ncl.edu.tw/handle/40465215945048252436

碩士 === 國立中央大學 === 財務金融學系碩士在職專班 === 92 === The Capital Asset Pricing Model（CAPM）has been used widely in academics and practice for a long time. However, a growing literature also documents some major asset-pricing anomalies that the realized cross-section stock returns are not consistent with the predictions of the CAPM. Many researchers find that the size, price-to-book ratio, and the momentum factors explain much of the cross-sectional stock returns unexplained by the CAPM. Therefore, this thesis compares the performance of optimized portfolios constructed based on various models, including the naive model, the CAPM, the Fama-French three-factor model, the four-factor model and the characteristics model. The empirical study is implemented using monthly returns of all firms listed on the TSE during July 1989 to June 2003. Our empirical result shows that the four-factor model, the Fama-French three-factor model, and the characteristics model perform better in explaining the cross-section of stock returns than the Naive model and the CAPM.