A Re-Examination of Performance of Optimized Portfolios

2017

Master's thesis Business Administration BE501 - University of Agder 2017 DeMiguel, Garlappi, and Uppal (2009) conducted a study demonstrating that meanvariance optimized portfolios do not consistently outperform the naive diversi cation strategy in out-of-sample tests. This caused a heated debate and several studies claim to defend the value of mean-variance optimization. Kirby and Ostdiek (2012) developed two new methods of mean-variance portfolio optimization and demonstrated that these strategies show superior out-of-sample performance as compared to performance of the 1/N strategy. Several other papers demonstrated that the Global Minimum Variance portfolio outperforms the naive diversi…