Abstract

http://ssrn.com/abstract=497290
 
 

Citations



 


 



Resampled Frontiers vs Diffuse Bayes: An Experiment


Harry Markowitz


University of California at San Diego

Nilufer Usmen


Montclair State University - School of Business


Journal Of Investment Management, Vol. 1, No. 4, Fourth Quarter 2003

Abstract:     
The experiment reported here compares two methods for handling uncertain inputs to a mean-variance analysis. Specifically, it compares Michaud's resampled frontier versus Bayesian inference with diffuse prior. A simulated "referee" generates ten "truths" about 8 asset classes. For each truth it randomly generates one hundred histories.

A simulated "Bayes Player" and "Michaud Player" process each history according to their respective methodologies, seeking portfolios to maximize given expected utility functions. Players are scored according to the actual utility achieved and their own estimates of this utility. The authors were surprised to find that, on average, the Michaud player won.

Keywords: Resampled Frontier, Bayesian analysis, diffuse Bayes, mean-variance analysis, sampling errors, Michaud

JEL Classification: G00

Accepted Paper Series





Not Available For Download

Date posted: April 12, 2004  

Suggested Citation

Markowitz, Harry and Usmen, Nilufer, Resampled Frontiers vs Diffuse Bayes: An Experiment. Journal Of Investment Management, Vol. 1, No. 4, Fourth Quarter 2003. Available at SSRN: http://ssrn.com/abstract=497290

Contact Information

Harry Markowitz (Contact Author)
University of California at San Diego ( email )
9500 Gilman Drive
La Jolla, CA 92093-0508
United States
(858) 534-3383 (Phone)
Nilufer Usmen
Montclair State University - School of Business ( email )
Upper Montclair, NJ 07043
United States
973-655-7075 (Phone)
Feedback to SSRN


Paper statistics
Abstract Views: 2,376

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo7 in 0.375 seconds