Is 1/n Really Better than Optimal Mean-Variance Portfolio?
23 Pages Posted: 25 Nov 2014
Date Written: November 1, 2014
It is widely believed that the 1/n portfolio provides a good ex-post performance. Several studies have compared the 1/n portfolio with respect to a set of optimal mean-variance policies to prove or disprove the superiority of the 1/n portfolio. However, this approach is not likely to yield a definitive answer, since it provides only relative information. This paper evaluates the performance ranking of the 1/n portfolio in absolute sense. We enumerate all possible portfolios within a specified asset universe, and compare the 1/n portfolio among all possible portfolios to find that 1/n is not really better than the average portfolio.
Keywords: Equally-Weighted Portfolio, Optimal Mean-Variance Portfolio, Portfolio Performance Evaluation
JEL Classification: G11, C60
Suggested Citation: Suggested Citation