Mimicking Portfolios with Conditioning Information

51 Pages Posted: 1 Feb 2005  

Wayne E. Ferson

University of Southern California; National Bureau of Economic Research (NBER)

Andrew F. Siegel

University of Washington - Department of Finance and Business Economics; National Bureau of Economic Research (NBER)

Tracy Xu

University of Denver

Multiple version iconThere are 2 versions of this paper

Date Written: January 2005

Abstract

Mimicking portfolios have long been useful in asset pricing research. In most empirical applications, the portfolio weights are assumed to be fixed over time, while in theory they may be functions of the economic state. This paper derives and characterizes mimicking portfolios in the presence of predetermined state variables, or conditioning information. The results generalize and integrate multifactor minimum variance efficiency (Fama, 1996) with conditional and unconditional mean variance efficiency (Hansen and Richard (1987), Ferson and Siegel, 2001). Empirical examples illustrate the potential importance of time-varying mimicking portfolio weights and highlight challenges in their application.

Suggested Citation

Ferson, Wayne E. and Siegel, Andrew F. and Xu, Tracy, Mimicking Portfolios with Conditioning Information (January 2005). NBER Working Paper No. w11020. Available at SSRN: https://ssrn.com/abstract=645262

Wayne E. Ferson (Contact Author)

University of Southern California ( email )

Los Angeles, CA 90089
United States

HOME PAGE: http://www-rcf.usc.edu/~ferson/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Andrew F. Siegel

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of Washington - Department of Finance and Business Economics ( email )

Box 353200
Seattle, WA 98195
United States

Tracy Xu

University of Denver ( email )

2201 S. Gaylord St
Denver, CO 80208-2685
United States

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