Fletcher, Jonathan (2011) Do optimal diversification strategies outperform the 1/N strategy in U.K. stock returns. International Review of Financial Analysis, 20 (5). 375–385. ISSN 1057-5219Full text not available in this repository. (Request a copy from the Strathclyde author)
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.
|Keywords:||estimation risk, estimation error, combined portfolio strategies, mean-variance timing, Finance, Finance, Economics and Econometrics|
|Subjects:||Social Sciences > Finance|
|Department:||Strathclyde Business School > Accounting and Finance|
|Depositing user:||Pure Administrator|
|Date Deposited:||06 Sep 2011 13:58|
|Last modified:||06 Jan 2017 09:55|