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What Matters Most in Portfolio Construction?

Sensitivity Analysis in the Presence of Transactions Costs
  • Dean M. Petrich
  • Ronald N. Kahn

Abstract

This paper empirically studies a practical question for users of Markowitz portfolio construction: in the presence of transactions costs, what are the benefits of increasing return forecasting skill, lowering costs, or increasing cost forecasting skill? We measure benefit by expected impact on the realized information ratio, and estimate this using a large number of single-asset simulations.

Keywords

Transaction Cost Basis Point Forecast Skill Market Impact Trade Size 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer Science+Business Media, LLC 2010

Authors and Affiliations

  • Dean M. Petrich
    • 1
  • Ronald N. Kahn
    • 2
  1. 1.Head of Proprietary Analytics GroupBarclays Global InvestorsSan FranciscoUSA
  2. 2.Global Head of Equity Research at Barclays Global InvestorsSan FranciscoUSA

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