Portfolio Selection Under Supply Chain Predictability
Computational Management Science, 2018, 15(2), 139-159
23 Pages Posted: 29 Mar 2016 Last revised: 31 Dec 2018
Date Written: June 24, 2016
Abstract
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
Keywords: Predictability of Returns, Supply Chain, Scenario Generation, Portfolio Selection, Stochastic Programming
JEL Classification: C32, C44, C53, C61, G11
Suggested Citation: Suggested Citation