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Details of talk

TitleMarket Efficiency and the Growth Optimal Portfolio
PresenterRenata Rendek (University of New South Wales)
Author(s)Renata Rendek
SessionStatistics
Time13:00:00 2017-09-26
Abstract


The paper predicts an Efficient Market Property for the equity market, where
stocks, when denominated in units of the growth optimal portfolio (GP), have
zero instantaneous expected returns. Well-diversified equity portfolios are
shown to approximate the GP, which explains the well-documented good performance
of equally weighted portfolios. Our proposed hierarchically weighted index (HWI)
is shown to be an even better proxy of the GP. It sets weights equal within
industrial and geographical groupings of stocks. When using the HWI as a proxy
for the GP the Efficient Market Property cannot be easily rejected and appears
to be robust.