Optimal ETF Portfolios for Different Objectives and Horizons
2018
This study identifies optimal portfolios for investors with different objectives and horizons, usinginvestable exchange-traded funds of major asset classes. The optimal portfolios offer much higher Sharpe ratios than the market portfolio. Only three funds representing corporate bonds, NASDAQ 100 index, and gold contribute to the optimal portfolios. Since short investment horizons are examined, most of the optimal portfolios invest mainly in corporate bonds. However, the optimal portfolios with market volatility invest mostly in the NASDAQ 100 index. As the only asset with normally distributed returns, gold participates in optimal portfolios for investors concerned about negative skewness and excess kurtosis.
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