Markowitz versus Michaud: Portfolio optimization strategies reconsidered

Arbeitspapier | Working paper

"Several attempts have been made to reduce the impact of estimation errors on the optimal portfolio composition. On the one hand, improved estimators of the necessary moments have been developed and on the other hand, heuristic methods have been generated to enhance the portfolio performance, for instance the 'resampled efficiency' of Michaud (1998). We compare the out-ofsample performance of traditional Mean-Variance optimization by Markowitz (1952) with Michaud's resampled efficiency in a comprehensive simulation study for a large number of relevant estimators appearing in the literature. In this context we consider different estimation periods as well as unconstrained and constrained portfolio optimization problems. The main finding of our simu-lation study concerning the optimization approach is that Markowitz outperforms Mi-chaud on average. Furthermore, the estimation strategy of Frost/Savarino (1988) proves to work excellent in all analyzed situations." (author's abstract)

Object Details

• Extent: Seite(n): 37
• Language: Englisch

References and Relationships

• Bibliographic citation: IF Working Paper Series (IF30V3)

Classification and Topics

• Subject: Wirtschaft ; Volkswirtschaftstheorie ; Portfolio-Management ; Wertpapier ; Börse ; Aktienmarkt ; Effizienz ; Optimierung

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Becker, Franziska ; Gürtler, Marc ; Hibbeln, Martin
• Event: Veröffentlichung
• (who): Technische Universität Braunschweig, Department Wirtschaftswissenschaften, Institut für Finanzwirtschaft
• (where): Deutschland, Braunschweig
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/55254
• Rights: GESIS - Leibniz-Institut für Sozialwissenschaften. Bibliothek Köln
• Last update: 21.06.2024, 4:26 PM CEST