Faculty of Business Administration
Visiting Scholar Seminar
An Anatomy of Characteristics in Dynamic Trading
Prof. Tao HUANG
Beijing Normal University-Hong Kong Baptist University United International College
Zhuhai
Date: 28 December 2021, Tuesday
Time: 16:30pm – 17:30pm
Venue: E22 – 4069
Abstract
We propose testing the joint and marginal power of characteristics in predicting returns via a dynamic trading strategy (e.g., Kyle, 1985). We find that most characteristics (88%) fail to supply independent information. Indeed, removing these subsumed characteristics significantly enhances the optimal portfolio returns. Our analysis further reveals a leading role played by Fama-French-Carhart factors as informative characteristics and a substantial variation in the dimension of informative factors over time. Interestingly, the return magnitude of optimal trading portfolios resembles that of machine learning algorithms, suggesting that our approach may shed light on the economic mechanisms of the latter approach.
Biography
Prof. Huang is an Associate Professor in Finance in the Division of Business and Management, Beijing Normal University-Hong Kong Baptist University United International College, Zhuhai. His research interest includes empirical asset pricing and machine learning, international financial market, market microstructure, mutual funds, Chinese financial market and financial big data analysis. Prof. Huang has published a series of articles in top journals in finance, such as Journal of Financial Markets, The Quarterly Journal of Finance, European Financial Management, Journal of International Business Studies, Journal of Banking and Finance, etc.
