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The Ex Post Performance of Four Portfolio Selection Algorithms

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  • Frankfurter, George M
  • Phillips, Herbert E
  • Faulk, Greg

Abstract

This paper explores the ex post performance of four widely cited (and sometimes applied) normative portfolio selection models. Each is supposed to solve the same portfolio selection problem relative to the same mean-variance efficiency criteria. It has been shown elsewhere, and this paper confirms, that the models result in vastly different ex ante stock selection strategies. However, the acid test of normative theory is ex post performance relative to a set of efficiency criteria or some other standard. The empirical results reported here show that, with one exception, the ex post performance of the models is consistent with the same mean-variance efficiency criteria, and, over a predictable range of outcomes, consistently outperform the index portfolio based on Standard & Poor's 500 Stock Index. Copyright 1999 by Kluwer Academic Publishers

Suggested Citation

  • Frankfurter, George M & Phillips, Herbert E & Faulk, Greg, 1999. "The Ex Post Performance of Four Portfolio Selection Algorithms," Review of Quantitative Finance and Accounting, Springer, vol. 13(4), pages 347-366, December.
    • Handle: RePEc:kap:rqfnac:v:13:y:1999:i:4:p:347-66
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    Cited by:

    1. Robert Goldberg, 2015. "A methodology for computing and comparing implied equity and corporate-debt Sharpe Ratios," Review of Quantitative Finance and Accounting, Springer, vol. 44(4), pages 733-754, May.
    2. Andrew Chen & Frank Fabozzi & Dashan Huang, 2012. "Portfolio revision under mean-variance and mean-CVaR with transaction costs," Review of Quantitative Finance and Accounting, Springer, vol. 39(4), pages 509-526, November.
    3. Jing-Rung Yu & Wan-Jiun Paul Chiou & Jian-Hong Yang, 2017. "Diversification benefits of risk portfolio models: a case of Taiwan’s stock market," Review of Quantitative Finance and Accounting, Springer, vol. 48(2), pages 467-502, February.
    4. Nieuwenhuis, Maarten & Gallagher, Denis, 2001. "The impact of landscape design planning on the timber production and financial outputs of a forest plantation in Ireland," Forest Policy and Economics, Elsevier, vol. 2(3-4), pages 267-280, July.

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