Traditional portfolio optimization has been often criticized since it does not account for estimation risk. Theoretical considerations indicate that estimation risk is mainly driven by the parameter uncertainty regarding the expected asset returns rather than their variances and covariances....

Traditional portfolio optimization has been often criticized since it does not account for estimation risk. Theoretical considerations indicate that estimation risk is mainly driven by the parameter uncertainty regarding the expected asset returns rather than their variances and covariances....

The best constant re-balanced portfolio represents the standard estimator for the log-optimal portfolio. It is shown that a quadratic approximation of log-returns works very well on a daily basis and a mean-variance estimator is proposed as an alternative to the best constant re-balanced...