Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
8954567 | Finance Research Letters | 2018 | 18 Pages |
Abstract
In this paper, we examine the impact of imprecise accounting information on optimal portfolio choice in the mean-variance sense. We provide a theoretical platform illustrating the exact way in which imprecise return errors affect portfolio choice and alter the optimal vector of weights. We demonstrate that the covariance between actual return and return error could partly offset the impact of low-quality information on variance-covariance matrix. This is in agreement with empirical evidence suggesting that optimal portfolio weights are highly sensitive to small estimation errors in expected returns, but they are less sensitive with respect to errors in return variance estimates.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Gady Jacoby, Shi Li, Yan Wang,