FRIC/FI Seminar with Christian Julliard, London School of Economics

On November 25, 2016 Christian Julliard will present "An Information-Theoretic Asset Pricing Model"

Fredag, 25 november, 2016 - 11:00 to 12:15

FRIC Center for Financial Frictions and the Department of Finance are proud to announce the upcoming seminar with Christian Julliard, London School of Economics.

Christian Julliard will present:

An Information-Theoretic Asset Pricing Model

Anisha Ghosh, Carnegie Mellon University
Christian Julliard, London School of Economics
Alex P. Taylor, Manchester Business School

We show that a non-parametric estimate of the pricing kernel, extracted using an information-theoretic approach, delivers out-of-sample smaller pricing errors and better cross-sectional fit than leading factor models, and identifies the maximum Sharpe ratio portfolio. This information SDF identifies a novel source of risk not captured by Fama-French and momentum factors, revealing an ‘information anomaly’ that generates annualized alphas of about 9%–24%. A tradable information portfolio that mimics this kernel has high out-of-sample Sharpe ratio (about 1 or more), outperforming both the 1/N benchmark and Value and Momentum strategies combined. These results hold for wide cross-sections of test portfolios.

Solbjerg Plads 3, 2000 Frederiksberg
Room: SPs13

Sidst opdateret: Department of Finance // 17/11/2016