ESTIMATION AND SELECTION BIAS IN MEAN‐VARIANCE PORTFOLIO SELECTION

George M. Frankfurter, Christopher G Lamoureux

Research output: Contribution to journalArticle

4 Citations (Scopus)

Abstract

Much research has focused on the problem of selecting portfolios without the benefit of parametric measures of risk and return. In this paper, a Monte Carlo technique is used to isolate the extent and nature of the problems introduced by this practice. The technique is employed in the context of classical statistical methodology without permitting short sales. It is shown that using estimators of expected return and risk not only obscures parametric values, but also affects portfolio composition in the Markowitz framework. In this study, these two components of bias are isolated and measured.

Original languageEnglish (US)
Pages (from-to)173-181
Number of pages9
JournalJournal of Financial Research
Volume12
Issue number2
DOIs
StatePublished - 1989
Externally publishedYes

Fingerprint

Portfolio selection
Selection bias
Measure of risk
Risk and return
Portfolio composition
Expected returns
Estimator
Methodology
Short sales

ASJC Scopus subject areas

  • Accounting
  • Finance

Cite this

ESTIMATION AND SELECTION BIAS IN MEAN‐VARIANCE PORTFOLIO SELECTION. / Frankfurter, George M.; Lamoureux, Christopher G.

In: Journal of Financial Research, Vol. 12, No. 2, 1989, p. 173-181.

Research output: Contribution to journalArticle

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