Delegated portfolio management and optimal allocation of portfolio managers |
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Authors: | Michael Christensen Michael Vangsgaard Christensen Ken Gamskjaer |
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Institution: | 1. Department of Economics and Business, School of Business and Social Sciences, Aarhus University, DK-8210 Aarhus V., Denmarkmic@asb.dk;3. Aros Capital Partners ApS, DK-8000 Aarhus C., Denmark;4. Hemonto A/S, DK-8000 Aarhus C., Denmark |
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Abstract: | In this article, we investigate whether the application of the mean-variance framework on portfolio manager allocation offers any out-of-sample benefits compared to a naïve strategy of equal weighting. Based on an exclusive data-set of high-net-worth (HNW) investors, we utilize a wide variety of methodologies to estimate the input parameters including exponentially weighted moving average (EWMA), generalized autoregressive conditional heteroscedasticity (GARCH) and Bayes–Stein shrinkage estimation. We apply nine different mean-variance models, but find that none of these present any consistent benefit over a naïve strategy of equal weighting. |
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Keywords: | delegated portfolio management mean-variance optimization estimation error |
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