RT Journal Article
SR Electronic
T1 Practical Applications of Implied Expected Returns and the Choice of a Mean–Variance Efficient Portfolio Proxy
JF Practical Applications
FD Institutional Investor Journals
SP 1
OP 3
DO 10.3905/pa.2016.3.4.140
VO 3
IS 4
A1 David Ardia
A1 Kris Boudt
A1 Joel Kranc
YR 2016
UL https://pm-research.com/content/3/4/1.1.abstract
AB Implied Expected Returns and the Choice of a Mean–Variance Efficient Portfolio Proxy David Ardia Kris Boudt If a risk-based portfolio is optimal, managers can reverse engineer the portfolio to learn what type of expected returns are compatible with the assumption that this portfolio is optimal. Those reverse-engineered return forecasts are the implied expected returns. In their article, Implied Expected Returns and the Choice of a Mean–Variance Efficient Portfolio Proxy , David Ardia of Laval University and Kris Boudt of Vrije Universiteit Brussel show that these implied expected returns are reasonable and potentially useful from a practical perspective.Their research shows that, over time, using implied expected returns and risk-based portfolios as a benchmark provides more accurate predictions and allows portfolio managers to conduct fewer portfolio changes than when a typical market-cap-weighted portfolio is used.TOPICS: Portfolio management/multi-asset allocation, factor-based models