A0623
Title: Social choice theory and market anomalies for portfolio construction
Authors: Alessandra Insana - University of Messina (Italy) [presenting]
Veronica Guidetti - University of Modena and Reggio Emilia (Italy)
Abstract: Social choice theory, traditionally used in voting systems to aggregate preferences, is innovatively applied to portfolio construction, taking into account historical market anomalies associated with specific stock characteristics. In particular, a novel methodology is presented for portfolio management based on the majority judgment ranking approach. Judging stocks using eleven well-known market anomalies, this method allows aggregating the information provided, facilitating the construction of ten portfolios and a long-short strategy. The empirical study conducted on US equities shows that the best portfolio strategy consistently outperforms traditional portfolios sorted by single characteristics. Furthermore, the use of majority judgment demonstrates resilience across various implementation choices, thereby reinforcing its effectiveness. This approach to portfolio management offers a promising avenue for future research and practical applications.
