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 language | English (US) |
|---|---|
| Pages (from-to) | 173-181 |
| Number of pages | 9 |
| Journal | Journal of Financial Research |
| Volume | 12 |
| Issue number | 2 |
| DOIs | |
| State | Published - 1989 |
| Externally published | Yes |
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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 journal › Article
}
TY - JOUR
T1 - ESTIMATION AND SELECTION BIAS IN MEAN‐VARIANCE PORTFOLIO SELECTION
AU - Frankfurter, George M.
AU - Lamoureux, Christopher G
PY - 1989
Y1 - 1989
N2 - 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.
AB - 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.
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UR - http://www.scopus.com/inward/citedby.url?scp=84986524545&partnerID=8YFLogxK
U2 - 10.1111/j.1475-6803.1989.tb00111.x
DO - 10.1111/j.1475-6803.1989.tb00111.x
M3 - Article
AN - SCOPUS:84986524545
VL - 12
SP - 173
EP - 181
JO - Journal of Financial Research
JF - Journal of Financial Research
SN - 0270-2592
IS - 2
ER -