In this replication paper, we extend Kelly, Malamud, and Pedersen (2021)'s new asset pricing framework to allow incorporating multiple predictive signals into optimal principal portfolios. Empirically, we find that the multi-signal theory is valuable for combining signals, improving a naive...

To understand theoretically why the 1/N rule is very difficult to beat, we show that the usual estimated investment strategies are biased even asymptotically when the dimensionality is high relative to sample size, and the 1/N rule is optimal in a one-factor model with diversifiable risks as...

In this paper, we study portfolio choice problem under estimation risk and show why the 1/N rule is very difficult to beat in applications and studies. First, as long as the dimensionality is high relative to sample size, we show that the usual estimated investment strategies are biased even...