Abstract
Language | English |
---|---|
Pages | 375–385 |
Number of pages | 11 |
Journal | International Review of Financial Analysis |
Volume | 20 |
Issue number | 5 |
Early online date | 10 Aug 2011 |
DOIs | |
Publication status | Published - Oct 2011 |
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Keywords
- estimation risk
- estimation error
- combined portfolio strategies
- mean-variance timing
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Do optimal diversification strategies outperform the 1/N strategy in U.K. stock returns. / Fletcher, Jonathan.
In: International Review of Financial Analysis, Vol. 20, No. 5, 10.2011, p. 375–385.Research output: Contribution to journal › Article
TY - JOUR
T1 - Do optimal diversification strategies outperform the 1/N strategy in U.K. stock returns
AU - Fletcher, Jonathan
PY - 2011/10
Y1 - 2011/10
N2 - This paper examines whether optimal diversification strategies outperform the 1/N strategy in U.K. stock returns. The study focuses on the performance of recent strategies developed by Tu and Zhou(2011) and Kirby and Ostdiek(2010). I find that a number of optimal asset allocation strategies can significantly outperform the 1/N strategy even after adjusting for trading costs. The strategies developed by Kirby and Ostdiek outperform the 1/N strategy, even at higher trading costs, due to the low turnover of these strategies. The strategies of Tu and Zhou have mixed performance after adjusting for trading costs due to the high turnover of these strategies. The results of the paper provide support for the use of optimal diversification strategies.
AB - This paper examines whether optimal diversification strategies outperform the 1/N strategy in U.K. stock returns. The study focuses on the performance of recent strategies developed by Tu and Zhou(2011) and Kirby and Ostdiek(2010). I find that a number of optimal asset allocation strategies can significantly outperform the 1/N strategy even after adjusting for trading costs. The strategies developed by Kirby and Ostdiek outperform the 1/N strategy, even at higher trading costs, due to the low turnover of these strategies. The strategies of Tu and Zhou have mixed performance after adjusting for trading costs due to the high turnover of these strategies. The results of the paper provide support for the use of optimal diversification strategies.
KW - estimation risk
KW - estimation error
KW - combined portfolio strategies
KW - mean-variance timing
UR - http://www.sciencedirect.com/science/journal/10575219
U2 - 10.1016/j.irfa.2011.07.002
DO - 10.1016/j.irfa.2011.07.002
M3 - Article
VL - 20
SP - 375
EP - 385
JO - International Review of Financial Analysis
T2 - International Review of Financial Analysis
JF - International Review of Financial Analysis
SN - 1057-5219
IS - 5
ER -