25

Market Volatility, Optimal Portfolios and Naive Asset Allocations

Massimiliano Caporin∗ and Loriana Pelizzon∗∗

∗University of Padova

∗∗University Ca’ Foscari Venice

Chapter Outline

25.1 Introduction

25.2 Mean and Variance Forecasts

25.2.1 Asset allocation strategies

25.3 Investment Sets

25.4 Performance Evaluation

25.5 Results from the Full Sample-Analysis

25.6 Rolling Performance Evaluation and Market Volatility

25.7 Conclusions

References

25.1 Introduction

Over the past 30 years we have seen a long debate on the performance of various asset allocation strategies when the investor cares only about the mean and the variance of static portfolio returns. In a recent paper, De Miguel et al. (2009b) show that the 1/N asset allocation rule typically ...

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