Management Department



Date of this Version



Investment Management and Financial Innovations, 15(1), 190-207.


© The author(s) 2019.

Open access



The authors study the performance of mean-variance optimized (MVO) equity portfolios for retail investors in various markets in the U.S. and around the world. Actively managed equity mutual funds have relatively high fees and tend to underperform their benchmark. Index funds such as exchange traded funds still charge appreciable fees, and only deliver the performance of the benchmark. The authors find that MVO portfolios are relatively easy to manage by a retail investor, and that they tend to outperform their benchmark or, at worst, equal its performance, even after adjusting for risk. Moreover, they show that the performance of these funds is not particularly sensitive to the frequency at which they are rebalanced so that, in the limit, an investor might have to rebalance his/her portfolio only once a year. This last finding translates into very low trading costs, even for retail investors. Thus, the authors conclude that MVOs offer an easy, cheap alternative to invest in the world’s equity markets.