Being Naive about Naive Diversification: Why Is 1/N Inefficient?
DeMiguel, Garlappi and Uppal (2007) show that, due to estimation errors, existing theory-based portfolio strategies are not as good as we once thought, and the estimation window needed for them to beat the naive 1/N rule (that invests equally across N risky assets) is around 3,000 months for a portfolio with 25 assets and about 6,000 months for a portfolio with 50 assets. In this paper, we provide new portfolio strategies that outperform both the 1/N rule and the existing ones under most scenarios with estimation window as small as 120 months, making the gains promised by modern portfolio theory obtainable in realistic out-of-sample investment horizons.
Portfolio choice parameter uncertainty shrinkage admissibility
Jun Tu Guofu Zhou
Olin School of Business,Washington University,St.Louis,MO 63130
国际会议
大连
英文
1-42
2008-07-02（万方平台首次上网日期，不代表论文的发表时间）