Abstract
This study extends the research on international portfolio diversification with estimation risk. The model suggested by Jorion is used to derive the predictive distribution of future returns. The estimator is then compared with the classical one for both with and without short sales. It is found that the improvement for various optimal portfolios is greater for the case of short sales than the case of no short sales.
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Hui, TK., Kwan, E. & Lee, CB. Optimal Portfolio Diversification: Empirical Bayes versus Classical Approach. J Oper Res Soc 44, 1155–1159 (1993). https://doi.org/10.1057/jors.1993.187
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DOI: https://doi.org/10.1057/jors.1993.187