Conditional risk and performance evaluation: Volatility timing, overconditioning, and new estimates of momentum alphas

• 成果类型: Article
• 署名作者: Boguth, Oliver; Carlson, Murray; Fisher, Adlai; Simutin, Mikhail
• 署名单位: University of British Columbia; Arizona State University; Arizona State University-Tempe; University of Toronto
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2011.06.002
• 发表日期: 2011
• 页码: 363-389
• 关键词: PERFORMANCE EVALUATION; conditional capm; Volatility timing; momentum

摘要

Unconditional alphas are biased when conditional beta covaries with the market risk premium (market timing) or volatility (volatility timing). We demonstrate an additional bias (overconditioning) that can occur any time an empiricist estimates risk using information, such as a realized beta, that is not available to investors ex ante. Calibrating to U.S. equity returns, volatility timing and overconditioning can plausibly impact alphas more than market timing, which has been the focus of prior literature. To correct market- and volatility-timing biases without overconditioning, we show that incorporating realized betas into instrumental variables estimators is effective. Empirically, instrumentation reduces momentum alphas by 20-40%. Overconditioned alphas overstate performance by up to 2.5 times. We explain the sources of both the volatility-timing and overconditioning biases in momentum portfolios. (C) 2011 Elsevier B.V. All rights reserved.