Abstract
Using monthly data for 160 stocks covering January 1977 to December 1991, we find that both the Historical Mean and the Industry Mean Models dominate the Global Mean and the Single Index Models. In theex-ante portfolio selection, the Historical Model dominates all other models when evaluated against the benchmark of the Global Minimum Variance Portfolio but a combination of historical correlation structure and Bayes-Stein Shrinkage expected returns dominates other models when the Optimal Tangency Portfolio is used as a benchmark for evaluation.
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Richard, YK.H., Raymond, SK.L. Correlation structure forecasting & ex ante portfolio selection strategies in the Japan market. Financial Engineering and the Japanese Markets 2, 1–14 (1995). https://doi.org/10.1007/BF02425228
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DOI: https://doi.org/10.1007/BF02425228