Dr Andre Souza, ESADE Business School

"How to Bet on Winners"
Friday, 15 March. 3 p.m.
Room 355 Gilbert Scott

Abstract

"How to Bet on Winners" by Andre Souza and Christian Brownlees

We introduce a decision theoretic framework to formalize the problem of stock selection for characteristic-sorted portfolios. We derive optimal selection strategies for a class of portfolio misclassification losses. The optimal strategies take the form of a stock return classification rule that depends on the risk preferences of the investor. Selecting stocks on the basis of expected-return sorts, a ubiquitous practice in the empirical finance literature, is also an optimal rule in special cases of the general framework. In an empirical application we find that the new strategies paired with machine learning methods lead to more efficient asset allocation.

Bio

Andre B.M. Souza is an Assistant Professor at ESADE Business School. His research interests include forecasting, financial econometrics, machine learning, empirical finance and empirical macroeconomics.

For further information, please contact business-school-research@glasgow.ac.uk

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First published: 11 March 2024

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