An intersection–union test for supporting the hypothesis that a given investment strategy is optimal among a set of alternatives is presented. It compares the Sharpe ratio of the benchmark with that of each other strategy. The intersection–union test takes serial dependence into account and...

In the present work, I derive the risk functions of 5 standard estimators for expected asset returns which are frequently advocated in the literature, viz the sample mean vector, the James-Stein and Bayes-Stein estimator, the minimum-variance estimator, and the CAPM estimator. I resolve the...

A portfolio-resampling procedure invented by Richard and Robert Michaud is the subject of a highly controversial discussion and big scientific dispute. It has been evaluated in many empirical studies and Monte Carlo experiments. Apart from the contradictory findings, the Michaud approach still...