The specification of prior parameters is a common practical problem when implementing Bayesian approaches to portfolio optimization. The precision parameter of the prior on the expected asset returns reflects the confidence of the investor in the prior knowledge. Within the framework of the...

In the context of modern portfolio theory, we compare the out-of-sample performance of 8 investment strategies which are based on statistical methods with the out-of-sample performance of a family of trivial strategies. A wide range of approaches is considered in this work, including the...