Markowitz meets Talmud: A combination of sophisticated and naive diversification strategies ☆

By Jun Tu, Guofu Zhou. 2011

420 citations recorded by the source corpus.

Subfields: Finance, Management Science and Operations Research

View Paper: https://www.semanticscholar.org/paper/e8a24a04c762426453b00cd4c1f715e2b446bb83

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Citations in the corpus

Parameter uncertainty in portfolio selection: Shrinking the inverse covariance matrix (2012, methodology): “…the above measures assuming a sample size of 60 which corresponds to 5 years of monthly returns.17 We also assume a risk aversion parameter of γ = 3 for the computation of the weights of the mean-variance portfolio and the portfolio of Tu and Zhou (2011) as well as for the computation of the CERs.”
On portfolio optimization: Imposing the right constraints (2013, background): “Thus, our paper relates to Chevrier and McCulloch (2008), DeMiguel et al. (2009a), and Tu and Zhou (2011), who claim to develop portfolio strategies achieving consistently higher Sharpe ratios than 1/N.”
Size Matters: Optimal Calibration of Shrinkage Estimators for Portfolio Selection (2011, background): “…of Kan and Zhou (2007); the second is obtained by shrinking the sample mean-variance portfolio towards the equally-weighted portfolio as in Tu and Zhou (2011); and the third is obtained by shrinking the sample minimum-variance portfolio towards the equally-weighted portfolio, similar to…”
Nonlinear Shrinkage of the Covariance Matrix for Portfolio Selection: Markowitz Meets Goldilocks (2017, positive): “Unlike the proposals by Kan and Zhou (2007), Frahm and Memmel (2010) and Tu and Zhou (2011), our method also handles the case c > 1, where the sample covariance matrix is not invertible.”
How Should Individual Investors Diversify? An Empirical Evaluation of Alternative Asset Allocation Policies (2014, background): “…error is so severe that various optimization models are oftentimes unable to beat a naïve 1/N diversification strategy (e.g., DeMiguel et al., 2009b; Duchin and Levy, 2009; Tu and Zhou, 2009).1 Hence, it seems insufficient to limit the analysis to extensions of the Markowitz (1952) model.”
It’s All in the Timing: Simple Active Portfolio Strategies that Outperform Naïve Diversification (2012, background): “This paper addresses many of the issues studied by Tu and Zhou (2011), but it does so from the perspective of an investor who assumes that the conditional means and variances of asset returns change through time.”
Forecasting Value-at-Risk under Different Distributional Assumptions (2016, background): “[21], Tu and Zhou [22], Brown et al.”
The 1/ N investment strategy is optimal under high model ambiguity (2012, background): “Several authors try to incorporate this finding in their proposed portfolio selection framework, see for example DeMiguel et al. (2009a); Tu and Zhou (2011).”
Is the Potential for International Diversification Disappearing? A Dynamic Copula Approach (2012, positive): “20 In the multivariate normal case, DeMiguel, Garlappi, and Uppal (2009) and Tu and Zhou (2011) analyze the relative performance of equal-weighted versus optimally weighted portfolios in an unconditional setting.”