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The Efficient Use of Conditioning Information in Portfolios

Journal of Finance 2001 56(3), 967-982
We study the properties of unconditional minimum‐variance portfolios in the presence of conditioning information. Such portfolios attain the smallest variance for a given mean among all possible portfolios formed using the conditioning information. We provide explicit solutions for n risky assets, either with or without a riskless asset. Our solutions provide insights into portfolio management problems and issues in conditional asset pricing.