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| Tekijä: | Tu, J. Zhou, G. |
| Otsikko: | Markowitz meets Talmud: A combination of sophisticated and naive diversification strategies |
| Lehti: | Journal of Financial Economics
2011 : JAN, VOL. 99:1, p. 204-215 |
| Asiasana: | portfolio selection diversification strategy theories models |
| Kieli: | eng |
| Tiivistelmä: | Pioneered by Markowitz (1952), the modern portfolio (here as: p-f.) theory is widely used in practice and extensively taught to MBAs. However, the estimated Markowitz p-f. rule with most of its extensions underperform the naive 1/N rule and also lose money on a risk-adjusted basis in many real data sets. This paper proposes an optimal combination of the naive 1/N rule with one of the four sophisticated strategies (herein as: s-strs.), the rules of Markowitz, Jorion (1986), MacKinlay and Pastor (2000), and the Kan and Zhou (2007), as a way for improving performance. It is found that the combined rules have a significant impact in improving the s-strs. and also outperform the 1/N rule in most scenarios. |
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