Title: Practical Portfolio Optimization
Speaker: Prof. Victor DeMiguel
Affiliation: London Business School
Location: CPSE seminar room (C615 Roderic Hill)
Time: 2:00pm
Abstract. The Nobel laureate Harry Markowitz showed that an investor who cares only about the mean and variance of portfolio returns should hold a portfolio on the efficient frontier. To implement these portfolios in practice, one needs to estimate the means and covariances of asset returns. Traditionally, the sample means and covariances have been used for this purpose. But due to estimation error, the portfolios that rely on the sample estimates typically perform poorly out of sample. In this talk, we will first illustrate the difficulties inherent in estimating mean-variance portfolios, and then we will discuss several approaches that can be used to overcome these difficulties in practice.
About the speaker. Victor DeMiguel is Professor of Management Science and Operations at London Business School. He holds a PhD in Management Science and Engineering from Stanford University, and an MS in Industrial Engineering from Universidad Politecnica de Madrid. Victor's research focuses on the design, analysis, and application of optimization models for managerial decision making. Applications include financial portfolio selection and competition modelling. His papers have been published in journals such as Management Science, Operations Research, and Mathematics of Operations Research. One of his most popular papers is “Optimal Versus Naive Diversification: How Inefficient is the 1/N Portfolio Strategy”, which received the Best Paper Award from the Institute for Quantitative Investment Research and was published in The Review of Financial Studies. Victor teaches the MBA courses Decision and Risk Analysis and Financial Modelling with Spreadsheets, and the Strategic Decision Making module for Executive Education. He is the recipient of the Junior Faculty Teaching Award and the Outstanding Core Course Teaching Award at London Business School. More information about Victor DeMiguel can be found here: