This study evaluates the efficiency of mean-variance analysis by using size-based portfolio approach. The empirical evidence shows that investors can simply profit from a size-based portfolio by its risk premium or reward-to-variability. These size-based portfolios, nevertheless, do not outperform the risk-free asset if we establish their weights ex ante from mean-variance technique and then apply such weights in the succeeding time periods. The results propose that risk premium is a decent factor for allocating an individual asset, but for portfolio optimization that lays much emphasis on portfolio contents and weights, it may not be as successful as what the mean-variance analysis portrays. ? EuroJournals Publishing, Inc. 2010.
Relation:
International Research Journal of Finance and Economics, 52
