Optimal Versus Naive Diversification: How Inefficient is the 1/<i>N</i>Portfolio Strategy?

We evaluate the out-of-sample performance of the sample-based mean-variance model, and its extensions designed to reduce estimation error, relative to the naive 1-N portfolio. Of the 14 models we evaluate across seven empirical datasets, none is consistently better than the 1-N rule in terms of Shar... View More