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Portfolio Management
Portfolio Management
Medium
An analyst at Ironwood Capital constructs a mean-variance optimized portfolio. The efficient frontier is based on 8 asset classes with 20 years of monthly return data. Which of the following is the most significant limitation of this approach?
A
Mean-variance optimization is highly sensitive to input estimates, particularly expected returns, often producing concentrated and unstable allocations
B
The approach cannot handle more than 5 asset classes effectively
C
Monthly data over 20 years provides too few observations for reliable estimates
D
Mean-variance optimization always produces equally weighted portfolios
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Tags
#mean-variance
#optimization
#efficient-frontier
#estimation-error
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