Portfolio selection for individual passive investing

David Puelz, P. Richard Hahn, Carlos M. Carvalho

Research output: Contribution to journalArticlepeer-review

Abstract

This paper considers passive fund selection from an individual investor's perspective. The growth of the passive fund market over the past decade is staggering. Individual investors who wish to buy these funds for their retirement and brokerage accounts have many options and are faced with a difficult selection problem. Which funds do they invest in, and in what proportions? We develop a novel statistical methodology to address this problem by adapting recent advances in posterior summarization. A Bayesian decision-theoretic approach is presented to construct optimal sparse portfolios for individual investors over time.

Original languageEnglish (US)
Pages (from-to)124-142
Number of pages19
JournalApplied Stochastic Models in Business and Industry
Volume36
Issue number1
DOIs
StatePublished - Jan 1 2020

Keywords

  • Bayesian methods
  • decision theory
  • model selection
  • portfolio selection

ASJC Scopus subject areas

  • Modeling and Simulation
  • Business, Management and Accounting(all)
  • Management Science and Operations Research

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