Risk and Return Properties of Portfolios Based on Directional Forecasts

Subject Areas : Financial engineering

Vahid Rooholelm ^{1 *}

1 - Lecturer of University and Executive & Consultant main industries

Received: 2016-04-07 Accepted : 2016-05-16 Published : 2016-12-21

Keywords: Return, Risk, risk models, beta index, led prediction method (arrow),

Abstract :

In this study, a formula is de rived for the period specific beta (market risk) for a portfolio of financial assets that has been formed on the basis of directional forecasts. This is an important contribution to the literature since measuring the risk of an actively managed portfolio is problematic due to the fact that managers may change fund risk conditional on market expectations. The period- specific nature of the measure is a significant advantage since historical fund re turns are not required and the beta is not influenced by prior fund returns’ deviations from the bench mark. The methodology employed allows for the development of a time series of fund betas that permits investigation into a number of important Empirical issues. This study is also of practical interest from the perspective of risk management and for both portfolio performance and attribution. Finally, there are many active strategies based on directional forecasts and the approach used here en com passes a significant proportion of these. The author of this article used of consultation and guidance of Rahnama Roodposhti Fereidoun, Professor and A member of the science team Islamic Azad University, Science and Research Branch ,Tehran, and thankses a lot of him.