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Time weighted portfolio optimisation

Time weighted portfolio optimisation In estimating the inputs into the modern portfolio theory (MPT) portfolio optimisation problem, it is usual to use equal weighted historic data. Equal weighting of the data, however, does not take account of the current state of the market. Consequently this approach is unlikely to perform well in any subsequent period as the data is still reflecting market conditions that are no longer valid. The need for some return weighting scheme that gives greater weight to the most recent data would seem desirable. Therefore, this study uses returns data which are weighted to give greater weight to the most recent observations to see if such a weighting scheme can offer improved ex ante performance over that based on unweighted data. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Property Investment & Finance Emerald Publishing

Time weighted portfolio optimisation

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Publisher
Emerald Publishing
Copyright
Copyright © 2003 MCB UP Ltd. All rights reserved.
ISSN
1463-578X
DOI
10.1108/14635780310481667
Publisher site
See Article on Publisher Site

Abstract

In estimating the inputs into the modern portfolio theory (MPT) portfolio optimisation problem, it is usual to use equal weighted historic data. Equal weighting of the data, however, does not take account of the current state of the market. Consequently this approach is unlikely to perform well in any subsequent period as the data is still reflecting market conditions that are no longer valid. The need for some return weighting scheme that gives greater weight to the most recent data would seem desirable. Therefore, this study uses returns data which are weighted to give greater weight to the most recent observations to see if such a weighting scheme can offer improved ex ante performance over that based on unweighted data.

Journal

Journal of Property Investment & FinanceEmerald Publishing

Published: Jun 1, 2003

Keywords: Return on investment; Portfolio investment; Performance

References

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