We explain the poor out-of-sample performance of mean-variance optimized portfolios, developing theoretical bias adjustments for estimation risk by asymptotically expanding future returns of portfolios formed with estimated weights. We provide closed-form non-Bayesian adjustments of classical...

A new technology is proposed for estimating the systematic (beta) risk of a firm's stock. Just as the implicit volatility of an asset is revealed by an ordinary call option, the "implicit beta" of a stock would be revealed by the price of an option to exchange shares of stock for shares of a...