Principal Portfolios: The Multi-Signal Case
11 Pages Posted: 19 Oct 2022
Date Written: October 12, 2022
In this replication paper, we extend Kelly, Malamud, and Pedersen (2021)'s new asset pricing framework to allow incorporating multiple predictive signals into optimal principal portfolios. Empirically, we find that the multi-signal theory is valuable for combining signals, improving a naive combination of single signal principal portfolios.
Keywords: portfolio choice, mean-variance optimization, naive diversification, predictive signals
JEL Classification: C3, C58, C61, G11, G12, G14
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