Author: Staub, Renato

Source: Journal of Asset Management, Volume 7, Number 5, January 2007 , pp. 358-370(13)

Publisher: Palgrave Macmillan

Abstract:

It is well known that short constraints impair portfolio efficiency, and most examinations provide evidence through constrained optimisations. But we think it is paramount to understand first how information must be translated to be in compliance with the fundamental law of active management (Flam). Hence, we simulate first signals and translate them into positions as suggested by Flam. Next, when hitting a constraint, we examine two separate effects that an optimiser does not distinguish: cutting off and subsequent reallocation. Both impair efficiency.Journal of Asset Management (2007) 7, 358-370. doi:10.1057/palgrave.jam.2250044

Document Type: Research article

DOI: http://dx.doi.org/10.1057/palgrave.jam.2250044

Publication date: 2007-01-01

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