Markowitz Meets Talmud: A Combination of Sophisticated and Naive Diversification Strategies

Tao, Jun; Zhou, Guofu

doi:10.2139/ssrn.1362477

Cited by 73 publications

(183 citation statements)

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“…My study complements the recent papers by Tu and Zhou (2011) and Kirby and Ostdiek (in press) by providing evidence on the performance of their strategies in a different market. I extend these studies by providing a performance comparison between the strategies developed in these papers.…”

Section: Contents Lists Available At Sciencedirectsupporting

confidence: 55%

“…Kirby and Ostdiek find that the VT and RRT strategies can outperform the 1/N strategy in domestic U.S. asset allocation strategies even in the presence of transaction costs. This paper examines whether the two combined portfolio strategies (combining 1/N with either the sample mean-variance portfolio or the Kan and Zhou (2007) three-fund rule) of Tu and Zhou (2011) and the two mean-variance timing strategies of Kirby and Ostdiek (in press) can outperform the 1/N strategy in domestic asset allocation strategies in U.K. stock returns. I focus on the U.K. to provide evidence on the performance of the combined portfolio strategies and the meanvariance timing strategies in a different market compared to the domestic U.S. and international asset allocation strategies used by Tu and Zhou and Kirby and Ostdiek.…”

Section: Contents Lists Available At Sciencedirectmentioning

confidence: 99%

“…The strategies have very low turnover and so even outperform the 1/N strategy when trading costs are high. Second, the combined portfolio strategies of Tu and Zhou (2011) have mixed performance relative to the 1/N strategy after adjusting for trading costs due to the high turnover of these strategies. Third, the GMV and OC strategies also significantly outperform the 1/N strategy but this finding is sensitive to the level of trading costs.…”

Section: Contents Lists Available At Sciencedirectmentioning

confidence: 99%

“…Two recent studies by Tu and Zhou (2011) and Kirby and Ostdiek (in press) develop alternative strategies that are able to outperform the 1/N strategy. Tu and Zhou (2011) propose combined portfolio strategies that are a weighted combination of the 1/N strategy and the optimal meanvariance strategy.…”

Section: Introductionmentioning

confidence: 99%

“…Tu and Zhou (2011) propose combined portfolio strategies that are a weighted combination of the 1/N strategy and the optimal meanvariance strategy. The weight chosen between the two portfolios is a tradeoff between variance and bias.…”

Section: Introductionmentioning

confidence: 99%

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Section: Contents Lists Available At Sciencedirectsupporting

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Section: Contents Lists Available At Sciencedirectmentioning

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Section: Contents Lists Available At Sciencedirectmentioning

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Do optimal diversification strategies outperform the 1/N strategy in U.K. stock returns?

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Optimal Portfolio Choice Under Decision‐Based Model Combinations

Pettenuzzo

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2016

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We extend the density combination approach of Billio et al. (2013) to feature combination weights that depend on the past forecasting performance of the individual models entering the combination through a utility-based objective function. We apply our model combination scheme to forecast stock returns, both at the aggregate level and by industry, and investigate its forecasting performance relative to a host of existing combination methods. Overall, we find that our combination scheme produces markedly more accurate predictions than the existing alternatives, both in terms of statistical and economic measures of out-of-sample predictability. We also investigate the performance of our model combination scheme in the presence of model instabilities, by considering individual predictive regressions that feature time-varying regression coefficients and stochastic volatility. We find that the gains from using our combination scheme increase significantly when we allow for instabilities in the individual models entering the combination.

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Unprofitability of food market investments

Vinzelberg

Auer

2022

Manage Decis Econ

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Using more than two decades of disaggregated return data, we provide a comprehensive study of the investment benefits offered by food futures. In addition to comparing them to established passive and active investment vehicles, we investigate whether diversified investors can capitalize on including food futures into their portfolios. Our analysis is conducted within traditional and modern mean‐risk portfolio frameworks (measuring risk in terms of variance and tail size, respectively) supplemented by robust resampling techniques. Reward‐to‐risk investment performance is evaluated out of sample and by means of state‐of‐the‐art bootstrap testing. Overall, we find that food futures neither surpass standalone investments in stock, bond, and nonfood commodity markets nor do they significantly improve optimized multi‐asset portfolios.

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Markowitz Meets Talmud: A Combination of Sophisticated and Naive Diversification Strategies

Cited by 73 publications

References 0 publications

Do optimal diversification strategies outperform the 1/N strategy in U.K. stock returns?

Do optimal diversification strategies outperform the 1/N strategy in U.K. stock returns?

Optimal Portfolio Choice Under Decision‐Based Model Combinations

Unprofitability of food market investments

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