Markowitz Versus the Talmudic Portfolio Diversification Strategies

摘要: Although expected utility theory and the classical mean variance diversification of Markowitz assert that optimal depends on joint distribution returns, investors tend to ignore these well-accepted theoretical approaches in favor naive investment strategy promulgated Babylonian Talmud called 1/3 rule (or 1/n for n assets),which assigns an equal weight each security portfolio. In testing efficiency rule, authors find it outperforms individual small portfolios out sample, but large (i.e., institutional investors) is superior. The advantage out-of-sample analysis absence exposures estimation errors.