Skip to main content

Main menu

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JPM
    • Awards
    • Editorial Board
    • Published Ahead of Print (PAP)
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

User menu

  • Sample our Content
  • Request a Demo
  • Log in

Search

  • ADVANCED SEARCH: Discover more content by journal, author or time frame
The Journal of Portfolio Management
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Sample our Content
  • Request a Demo
  • Log in
The Journal of Portfolio Management

The Journal of Portfolio Management

ADVANCED SEARCH: Discover more content by journal, author or time frame

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JPM
    • Awards
    • Editorial Board
    • Published Ahead of Print (PAP)
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter
Article

Stability-Adjusted Portfolios

Mark Kritzman and David Turkington
The Journal of Portfolio Management Special QES Issue 2016, 42 (5) 113-122; DOI: https://doi.org/10.3905/jpm.2016.42.5.113
Mark Kritzman
is the CEO at Windham Capital Management in Boston, MA, and a senior lecturer at MIT Sloan School of Management in Cambridge, MA.
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • For correspondence: kritzman@mit.edu
David Turkington
is a senior vice president at State Street Associates in Cambridge, MA.
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • For correspondence: dturkington@statestreet.com
  • Article
  • Info & Metrics
  • PDF (Subscribers Only)
Loading

Click to login and read the full article.

Don’t have access? Click here to request a demo 
Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
EMEA: +44 0207 139 1600

Abstract

The conventional approach for addressing estimation error in portfolio construction is to devise techniques for reducing the errors, such as compressing all the estimates toward a cross-sectional average or some other prior belief. In this article, the authors propose an alternative approach for dealing with estimation error, arguing that some estimates may be more or less stable than others. The authors propose that rather than attempting to mitigate estimation error by making the estimates more similar to each other, portfolio managers should measure their relative stability and form portfolios that explicitly account for this feature, thus potentially making them less similar to each other. The authors focus on measures of risk rather than means, because portfolio managers typically extrapolate historical covariances but estimate expected returns based on subjective views rather than historical averages. Moreover, many important investment applications, such as index replication, focus exclusively on risk mitigation. The authors show that portfolios that explicitly account for stability in their construction have substantially different allocations and more stable risk profiles than portfolios that are blind to estimation error, as well as those that rely on Bayesian shrinkage.

  • © 2016 Pageant Media Ltd
View Full Text

Don’t have access? Click here to request a demo

Alternatively, Call a member of the team to discuss membership options

US and Overseas: +1 646-931-9045

UK: 0207 139 1600

Log in using your username and password

Forgot your user name or password?
PreviousNext
Back to top

Explore our content to discover more relevant research

  • By topic
  • Across journals
  • From the experts
  • Monthly highlights
  • Special collections

In this issue

The Journal of Portfolio Management: 42 (5)
The Journal of Portfolio Management
Vol. 42, Issue 5
Special QES Issue 2016
  • Table of Contents
  • Index by author
Print
Download PDF
Article Alerts
Sign In to Email Alerts with your Email Address
Email Article

Thank you for your interest in spreading the word on The Journal of Portfolio Management.

NOTE: We only request your email address so that the person you are recommending the page to knows that you wanted them to see it, and that it is not junk mail. We do not capture any email address.

Enter multiple addresses on separate lines or separate them with commas.
Stability-Adjusted Portfolios
(Your Name) has sent you a message from The Journal of Portfolio Management
(Your Name) thought you would like to see the The Journal of Portfolio Management web site.
CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.
Citation Tools
Stability-Adjusted Portfolios
Mark Kritzman, David Turkington
The Journal of Portfolio Management Jul 2016, 42 (5) 113-122; DOI: 10.3905/jpm.2016.42.5.113

Citation Manager Formats

  • BibTeX
  • Bookends
  • EasyBib
  • EndNote (tagged)
  • EndNote 8 (xml)
  • Medlars
  • Mendeley
  • Papers
  • RefWorks Tagged
  • Ref Manager
  • RIS
  • Zotero
Save To My Folders
Share
Stability-Adjusted Portfolios
Mark Kritzman, David Turkington
The Journal of Portfolio Management Jul 2016, 42 (5) 113-122; DOI: 10.3905/jpm.2016.42.5.113
del.icio.us logo Digg logo Reddit logo Twitter logo CiteULike logo Facebook logo Google logo LinkedIn logo Mendeley logo
Tweet Widget Facebook Like LinkedIn logo

Jump to section

  • Article
    • Abstract
    • SOURCES OF ESTIMATION ERROR
    • CONSTRUCTING A STABILITY-ADJUSTED RETURN DISTRIBUTION
    • CONSTRUCTING PORTFOLIOS FROM STABILITY-ADJUSTED RETURN SAMPLES
    • RESULTS
    • SUMMARY
    • APPENDIX
    • ENDNOTES
    • REFERENCES
  • Info & Metrics
  • PDF

Similar Articles

Cited By...

  • No citing articles found.
  • Google Scholar

More in this TOC Section

  • Editor’s Introduction for 2021 Special Issue on Multi-Asset Strategies
  • PERSPECTIVES: Plato or Aristotle: Who Got It Right? Evidence from the Equity Markets
  • Editor’s Introduction for 2021 Special Issue on Factor Investing
Show more Article
LONDON
One London Wall, London, EC2Y 5EA
United Kingdom
+44 207 139 1600
 
NEW YORK
41 Madison Avenue, New York, NY 10010
USA
+1 646 931 9045
pm-research@pageantmedia.com
 

Stay Connected

  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

MORE FROM PMR

  • News
  • Awards
  • Investment Guides
  • Videos
  • About PMR

INFORMATION FOR

  • Academics
  • Agents
  • Authors
  • Content Usage Terms

GET INVOLVED

  • Advertise
  • Publish
  • Article Licensing
  • Contact Us
  • Subscribe Now
  • Sign In
  • Update your profile
  • Give us your feedback

© 2021 Pageant Media Ltd | All Rights Reserved | ISSN: 0095-4918 | E-ISSN: 2168-8656

  • Site Map
  • Terms & Conditions
  • Privacy Policy
  • Cookies