PT - JOURNAL ARTICLE
AU - Ardia, David
AU - Boudt, Kris
ED - Kranc, Joel
TI - Practical Applications of Implied Expected Returns and the Choice of a Mean–Variance Efficient Portfolio Proxy
AID - 10.3905/pa.2016.3.4.140
DP - 2016 Apr 30
TA - Practical Applications
PG - 1--3
VI - 3
IP - 4
4099 - http://pa.pm-research.com/content/3/4/1.1.short
4100 - http://pa.pm-research.com/content/3/4/1.1.full
AB - Implied Expected Returns and the Choice of a Mean–Variance Efficient Portfolio Proxy David Ardia Kris Boudt If a risk-based portfolio is optimal, managers can reverse engineer the portfolio to learn what type of expected returns are compatible with the assumption that this portfolio is optimal. Those reverse-engineered return forecasts are the implied expected returns. In their article, Implied Expected Returns and the Choice of a Mean–Variance Efficient Portfolio Proxy , David Ardia of Laval University and Kris Boudt of Vrije Universiteit Brussel show that these implied expected returns are reasonable and potentially useful from a practical perspective.Their research shows that, over time, using implied expected returns and risk-based portfolios as a benchmark provides more accurate predictions and allows portfolio managers to conduct fewer portfolio changes than when a typical market-cap-weighted portfolio is used.