A New Empirical Perspective on the Minimum Variance Portfolio
22 Pages Posted: 7 Mar 2019
Date Written: February 17, 2019
This study examines the market level determinants of the portfolio construction process behind minimum variance investing. I show that the minimum variance portfolio (MVP) weight composition will be similar to that of equally weighted portfolio (1/N portfolio) if the ratio of idiosyncratic volatility relative to total return volatility is high and the number of securities in the portfolio is large.
Keywords: Minimum Variance Portfolio (MVP); 1/N Portfolio; Return Volatility
JEL Classification: G11
Suggested Citation: Suggested Citation