Ensembles of Portfolio Rules

46 Pages Posted: 23 Sep 2022 Last revised: 18 Jan 2023

See all articles by Federico Nardari

Federico Nardari

University of Melbourne - Department of Finance

Rainer Alexander Schüssler

University of Rostock - Department of Economics

Date Written: January 11, 2023


We propose a framework for combining portfolio rules while mitigating the impact of estimation error. Our main goal is to integrate heterogeneous rules that previously proposed combination methods cannot accommodate, enabling researchers and investors to leverage established and ongoing advances in portfolio choice. The proposed framework relies on the (pseudo) out-of-sample returns of the considered rules, thus avoiding estimation of the PRs’ return moments. The optimal combination is determined by an ensemble approach that maximizes the utility generated jointly by the candidate rules while allowing for learning about the PRs’ relative performance. Based on out-of-sample evaluations of over forty years, we document substantial utility gains for our approach compared to both individual rules and previously proposed combination strategies.

Keywords: Portfolio choice; Combination of estimators; Ensemble learning; Estimation risk

JEL Classification: G11, C10

Suggested Citation

Nardari, Federico and Schüssler, Rainer Alexander, Ensembles of Portfolio Rules (January 11, 2023). Available at SSRN: https://ssrn.com/abstract=4217088 or http://dx.doi.org/10.2139/ssrn.4217088

Federico Nardari

University of Melbourne - Department of Finance ( email )

Faculty of Economics and Commerce
Parkville, Victoria 3010 3010

Rainer Alexander Schüssler (Contact Author)

University of Rostock - Department of Economics ( email )

Ulmenstr. 69
Rostock, 18057

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