Portfolio Selection for Individual Passive Investing

41 Pages Posted: 5 Jul 2017 Last revised: 30 Jul 2019

See all articles by David Puelz

David Puelz

University of Chicago - Booth School of Business

P. Richard Hahn

Arizona State University (ASU) - School of Mathematical and Statistical Sciences

Carlos M. Carvalho

University of Texas at Austin - Red McCombs School of Business

Date Written: July 28, 2019

Abstract

This paper considers passive fund selection from an individual investor’s perspective. The growth of the passive fund market over the past decade is staggering. Individual investors who wish to buy these funds for their retirement and brokerage accounts have many options and are faced with a difficult selection problem. Which funds do they invest in, and in what proportions? We develop a novel statistical methodology to address this problem. A Bayesian decision-theoretic approach is presented to construct optimal sparse portfolios for individual investors over time.

Keywords: Bayesian methods, dynamic portfolio selection, decision theory, model selection

Suggested Citation

Puelz, David and Hahn, P. Richard and Carvalho, Carlos M., Portfolio Selection for Individual Passive Investing (July 28, 2019). Available at SSRN: https://ssrn.com/abstract=2995484 or http://dx.doi.org/10.2139/ssrn.2995484

David Puelz (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

P. Richard Hahn

Arizona State University (ASU) - School of Mathematical and Statistical Sciences ( email )

Tempe, AZ 85287-1804
United States

Carlos M. Carvalho

University of Texas at Austin - Red McCombs School of Business ( email )

Austin, TX 78712
United States

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