Model scan and optimal portfolio choice in European stock returns

Jonathan Fletcher*, Andrew Marshall, Michael O'Connell

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

This study examines the performance benefits of using the best linear factor models from the Bayesian model scan of Chib, Zhao, and Zhou [2024. “Winners from Winners: A Tale of Risk Factors.” Management Science 70:396–414] in optimal mean-variance European regional factor strategies. The study finds that using the best models from the model scan delivers significant out-of-sample performance benefits relative to two benchmark models. Our study also finds that strategies that use the best models from the model scan also perform well relative to strategies based on traditional factor models.
Original languageEnglish
Pages (from-to)1-18
Number of pages18
JournalEuropean Journal of Finance
Early online date18 May 2025
DOIs
Publication statusPublished - 18 May 2025

Keywords

  • Markowitz Mean-Variance
  • Bayesian analysis
  • European factors

Fingerprint

Dive into the research topics of 'Model scan and optimal portfolio choice in European stock returns'. Together they form a unique fingerprint.

Cite this