Input Estimation
- A Note on Statistics vs. Finance: Is Return Easier to Estimate Than Risk?
This article explains and rationalizes these different viewpoints on the relative precision available in risk and return estimates for portfolio optimization problems.
Author: David Esch - Are Good Estimates Enough?
Markowitz optimization has been the standard, but it does not correct for estimate uncertainty.
Author: Richard Michaud and Robert Michaud
Publication: Investment Management Consultants Association. January/February 2009 - Estimation Error and Portfolio Optimization (available through JOIM)
Richard Michaud and Robert Michaud review and update the optimization information introduced in Efficient Asset Management.
Author: Richard Michaud and Robert Michaud
Publication: JOIM First Quarter 2008 - Estimation Error and Portfolio Optimization (draft)
Richard Michaud and Robert Michaud review and update the optimization information introduced in Efficient Asset Management.
Author: Richard Michaud and Robert Michaud - Resampled Efficiency For Financial Planning and Return Forecasting
An examination of the effect of forecast certainty level indicate that the enormous effort focused on input estimation by many managers and institutions without Resampled Efficient Optimization is misplaced and likely to be ineffective. James-Stein Estimation is compared with the Sample mean for estimation of the expected return.
Authors: Richard O. Michaud & Robert O. Michaud
Publication: August 2003 Newsletter - Forecast from the Past
Many financial planners may not fully understand the limitations of traditional estimation methods when using historical data to create an optimal portfolio. Employing James-Stein estimation techniques is one way of grappling with these limitations.
Authors: Richard O. Michaud & C. Michael Carty
Publication: Financial Planning Magazine. November 1, 1999