|
||||
|
||||
Robust Portfolio Optimisation with Multiple ExpertsFrank LutgensMaastricht School of Business and Economics Peter C. SchotmanMaastricht University March 2007 CEPR Discussion Paper No. DP6161 Abstract: We consider mean-variance portfolio choice of a robust investor. The investor receives advice from J experts, each with a different prior for the distribution of returns. Confronted with these multiple priors the investor follows a min-max portfolio strategy. We study the structure of the robust mean-variance portfolio and empirically compare its performance with a variety of alternative portfolio strategies. The empirical tests are based on bootstrap simulations on the 25 Fama-French portfolios and on 81 European country and value portfolios. We find that the robust portfolio performs well in both settings. Robust portfolios do not exhibit the extreme weights typically observed in naive mean-variance portfolios. Robust portfolios are also better diversified than portfolios that impose short-sell constraints to suppress the symptoms of extreme weights.
Number of Pages in PDF File: 51 Keywords: Mean-variance, model uncertainty, portfolio choice JEL Classification: C11, D80 working papers seriesDate posted: May 19, 2008Suggested Citation |
|
|||||||||||||
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
FAQ
Terms of Use
Privacy Policy
Copyright
This page was processed by apollo8 in 0.891 seconds