Portfolio Frequency Structure Preferences
52 Pages Posted: 8 Jul 2016 Last revised: 24 Nov 2020
Date Written: November 23, 2020
I examine the optimal portfolio allocation for investors with risk frequency preferences. As an implication, the portfolio opportunity set can be uniquely constructed from a set of basis frequency structures. Factor model representations represent restrictions on the frequency structure space, which is equivalent to finding a linear combination of frequency structures that are required to price a portfolio. A portfolio’s alpha results from the frequency structure misalignment between the marginal investor and the factor model implied one.
Keywords: Asset pricing, Equity risk premium, Frequency domain
JEL Classification: C60, G11, G12
Suggested Citation: Suggested Citation