Submitted by: Submitted by monalisapal
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Words: 659
Pages: 3
Category: Science and Technology
Date Submitted: 01/29/2013 05:44 PM
January, 2013
Naïve Strategy vs Markowitz Model
EDHEC students:
Laurie, Xianghui, Kathleen, Yuchen, Monalisa
Etude de Satisfaction – CCI du Var - Tout droit de reproduction réservé à EDHEC Junior Etudes. Cette proposition est valable 3 mois.
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Summary
Overview & Objectives Naive Strategy Methodology Markowitz Strategy Methodology Results & Conclusion
Etude de Satisfaction – CCI du Var - Tout droit de reproduction réservé à EDHEC Junior Etudes. Cette proposition est valable 3 mois.
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Objectives
Naïve strategy Model
Markowitz Model
Conclusion
• The objective of the assignment on Naïve Strategy vs Markowitz model is to find that of selected sample-based strategies on given datasets which model is superior statically. • Basically we want to find out if the Markowitz model can beat a naïve strategy • In the article “Optimal Versus Naive Diversification: How Inefficient is the 1/N Portfolio Strategy” by DeMiguel et al. (2007), they address the out-ofsample performance of selected sample-based strategies on U.S. datasets. Their striking results : They tested 14 models based on the Markowitz model and found that no one can beat statistically a naïve portfolio strategy on different markets !!!! • Our goal : to check their results with two models : the naïve strategy and the sample based Markowitz model (MV)
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Objectives
Naïve strategy
Markowitz Model
Conclusion
For the naïve strategy approach, we calculate the mean of each asset’s monthly return from July, 1963 to July, 2011.
Naïve strategy Model
Markowitz Model
Conclusion
The weight of each of the ten assets is equally 10% of portfolio. Summing up the mean of each asset and then divided by to calculate the rate of return of the portfolio, we get the rate of return of the portfolio
E(R)= 0.94%
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Objectives
Naïve strategy
Markowitz Model
Conclusion
For Markowitz Model, we divide the dataset into sets with 60 samples. We run...