Value weighting and simple optimization of portfolios: an empirical examination Academic Article uri icon

abstract

  • Reviews the previous research on the management of portfolio investment and compares the performance of a typical small investors portfolio of nine popular stocks (optimized portfolio) with a valueweighted portfolio (VW), using 19921997 US data. Explains how the portfolios were derived on a rolling basis from the previous 30 months data, using four risk levels for the optimized portfolios (OPs). Shows that as risk aversion increases for OPs, minimum returns tend to decrease but average returns increase; but that VW provides superior returns with less volatility. Considers the underlying reasons for the results, concludes that diversification is important even when small numbers of stocks are involved; and suggests some avenues for further research.

published proceedings

  • Managerial Finance

author list (cited authors)

  • Dye, R. T., & Groth, J. C.

citation count

  • 2

complete list of authors

  • Dye, Richard T||Groth, John C

publication date

  • January 2000