Does optimized portfolios outperform the naive diversification: Implications from joint tests Can optimized trading strategies significa ntly outperf…

2020

Master´s thesis in Business Administration (BE501) This thesis expands upon the debate surrounding the paper of DeMiguel, Garlappi &Uppal (2009). We investigate the performance of optimized strategies compared to the naive 1/N rule while controlling for data-snooping. Using the Sharpe ratio and theFFC4 alpha as performance measures, we investigate 10 basic portfolio strategies with datasets from the US and Norwegian markets. We attempt to answer two weaknesses of previous studies on the topic by accounting for data-snooping using White’s RealityCheck (WRC) and the Superior Predictive Ability (SPA) test. In addition, we include the alpha measure in order to account for the established factor…