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Asset Pricing Equal or Value Weighting? Implications for Asset-Pricing Tests 8 October, 2014 - London, United Kingdom
An evening presentation with Professor Raman Uppal

At a special evening presentation in London on 8 October, 2014, Raman Uppal, Professor of Finance at EDHEC Business School and Core Faculty Member of the EDHEC-Risk Institute PhD in Finance, will share new insights on the performance of equal-weighted portfolios and show how the evaluation of asset pricing models is radically impacted by how test portfolios are weighted.

Capitalisation-weighting is not only used to construct major equity indices which are then used by the investment management industry as benchmarks to track or outperform, but also plays a central role in asset pricing, starting with the CAPM and its “market” portfolio. At the same time, the use of equal-weighted mean returns is ubiquitous in empirical finance. Since previous work has shown that equal-weighting over-performs capitalisation-weighting, it makes sense to examine whether the choice of weighting impacts inferences when testing asset-pricing models.

Recent research by Professor Uppal and his co-authors addresses this question in three steps. First, it documents substantial risk-adjusted difference in the performance of equal- and value-weighted portfolios at a monthly frequency. Second, it attributes this difference between exposure to systematic risk factors and rebalancing effect. Finally, it demonstrates that this difference substantially impacts the inferences drawn from empirical work on asset pricing by looking at tests of the CAPM, of the spanning properties of the stochastic discount factor, of the relation between characteristics and returns and of the pricing of idiosyncratic volatility.

  • 5:45pm

  • 6:00pm
    Presentation: Equal or Value Weighting? Implications for Asset-Pricing Tests
    Raman Uppal, Professor of Finance, EDHEC Business School
    • Documenting the over-performance of equal-weighted portfolios
    • Recognising alpha and beta: a four-factor analysis of competing weighting schemes
    • Understanding the rebalancing effect as a contrarian strategy
    • Measuring the impact of weighting choices on tests of asset pricing models

  • 7:30pm
    Question & Answer Session

  • 8.00pm
About the Speaker

Professor Uppal’s research interests lie in the fields of portfolio selection, asset allocation and asset pricing in dynamic environments; valuation and hedging of derivatives in incomplete markets; exchange rates and international capital flows; and general equilibrium analysis of capital market regulation.

He has published widely in leading journals such as Journal of Finance, Management Science and Review of Financial Studies, and has received numerous grants and awards for his research work.

Prior to joining EDHEC Business School in 2011, he was a Professor of Finance and Chair of the Finance Subject Area at the London Business School. He has held visiting positions at KU Leuven, the MIT Sloan School of Management, the London School of Economics and served as Co-Director of the Financial Economics Programme of the Centre for Economic Policy Research. He holds a BA in Economics from Delhi University and MA, MBA and PhD degrees from the Wharton School of the University of Pennsylvania.
Event Details
  When   Between 08/10/2014 05:30 PM and 08/10/2014 09:00 PM
Where   EDHEC Risk Institute—Europe, Ten Fleet Place, Ludgate, London, United Kingdom
Contact Details
  Name   Brigitte Bogaerts
E-mail   brigitte.bogaerts@edhec-risk.com
Phone   +33 493 183 267