A Robust Approach to Optimal Portfolio Choice

UNIVERSITY OF TECHNOLOGY SYDNEY
Finance Department
Research Seminars in Finance

Topic: A Robust Approach to Optimal Portfolio Choice with Parameter Uncertainty

Speaker: Alberto Martin-Utrera, Iowa State University

Abstract: It is well known that estimated mean-variance portfolios deliver, on average, poor out-of-sample performance. A lesser-known fact that we characterize in this paper is that their out-of-sample performance is also very volatile. Using our analytical characterization of out-of-sample performance volatility, we propose a measure of portfolio robustness defined as the ratio between out-of-sample utility mean to out-of-sample utility standard deviation. We exploit our measure of portfolio robustness to calibrate shrinkage portfolios and show that they outperform those that ignore parameter uncertainty or only optimize out-of-sample utility mean.

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Moderator: Vitali Alexeev, University of Technology Sydney

Date: Wednesday, 15th September 2021
Time: 12-1 pm (Australian Eastern Standard Time)
Venue: This is on online Zoom webinar.

Seminar protocols:

• The webinar will run for 45 minutes, followed by a 15 minute Q&A session.
• There will be a moderator for each seminar event, who will facilitate communication and resolve any technical issues.
• Participants can use the chat facility or raise their had to ask questions during the presentation. The moderator will then alert the speaker at the appropriate time and either ask the questions raised or unmute the participant so they can ask the question directly to the presenter.

Co-ordinator: Harry Scheule

Enquiries: Duncan Ford