Finance Seminar with Yale Professor Antti Petajisto
Professor Antti Petajisto from the Yale School of Management will be the guest speaker at this week's Finance Seminar. All are invited to attend.
The topic of this seminar is: "Should Benchmarks Indices Have Alpha? Revisiting Performance Evaluation."
Abstract:
Standard Fama-French and Carhart models produce economically and statistically significant nonzero alphas even for passive benchmark indices such as the S&P 500 and Russell 2000. We find that these alphas primarily arise from the disproportionate weight the Fama-French factors place on small value stocks which have performed well, and from the CRSP value-weighted market index which is a downward-biased benchmark for U.S. stocks. We explore alternative ways to construct these factors and propose alternative models constructed from common and easily tradable benchmark indices. Such index-based models outperform the standard models both in terms of asset pricing tests and performance evaluation of mutual fund managers. View paper in PDF format.
More information about Professor Antti Petajisto.
