Portfolio selection under supply chain predictability

We investigate whether the returns of some industry portfolios predict the returns of other industry portfolios. We find a strong lead-lag structure which is statistically and economically significant. These findings suggest that information diffuses only gradually across industries. Moreover, we sh...

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Bibliographic Details
Published in:Computational management science 2018-06, Vol.15 (2), p.139-159
Main Authors: Bjerring, Thomas Trier, Rasmussen, Kourosh Marjani, Weissensteiner, Alex
Format: Article
Language:English
Subjects:
Business and Management
Economic models
Operations Research/Decision Theory
Optimization
Original Paper
Portfolio management
Risk analysis
Supply chains
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Summary:We investigate whether the returns of some industry portfolios predict the returns of other industry portfolios. We find a strong lead-lag structure which is statistically and economically significant. These findings suggest that information diffuses only gradually across industries. Moreover, we show that this predictability can be exploited in a mean-variance optimization framework. The calculated out-of-sample portfolio returns are attractive under different return-risk measures, and they show positive risk-adjusted excess returns which are not explained by classical risk factors.
ISSN:1619-697X
1619-6988
DOI:10.1007/s10287-018-0308-y