Mimicking portfolios and exact arbitrage pricing

Article Abstract:

We characterize the sets of mimicking positions with returns that can serve in place of factors in an exact K-factor arbitrage-pricing relation for a set of N assets. All of the sets are K-dimensional nonsingular linear transformations of each other. We interpret three examples of such transformations and discuss empirical considerations. We provide conditions under which the mimicking positions can be expressed as portfolios, and we characterize the relation between mimicking portfolios and the minimum variance frontier. (Reprinted by permission of the publisher.)

Arbitrage

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Mean-variance spanning

Article Abstract:

The authors propose a likelihood-ratio test of the hypothesis that the minimum-variance frontier of a set of K assets coincides with the frontier of this set and another set of N assets. They study the relation between this hypothesis, exact arbitrage pricing, and mutual fund separation. The exact distribution of the test statistic is available. The authors test the hypothesis that the frontier spanned by three size-sorted stock portfolios is the same as the frontier spanned by thirty-three size-sorted stock portfolios. (Reprinted by permission of the publisher.)

Methods

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Contagious speculation and a cure for cancer: a nonevent that made stock prices soar

Article Abstract:

This article examines how a newspaper report on a potential cure for cancer caused an increase in the pharmaceutical company's stock and the biotechnology industry in general. The cancer research had been previously published at least five months early, leading the authors to assert that the speculation in stock was due to public attention, not new information, and that share prices would remain permenantly high.

Pharmaceutical Preparation Manufacturing, Pharmaceutical preparations, World, Statistical Data Included, Evaluation, Drugs, Economic aspects, Pharmaceutical industry, Cancer research, Stock-exchange, Stock exchanges, Speculation, Cancer, Biotechnology

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