Portfolio selection for individual passive investing

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

Applied Stochastic Models in Business and Industry, 2020, vol. 36, issue 1, 124-142

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.

Date: 2020
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https://doi.org/10.1002/asmb.2483

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Persistent link: https://EconPapers.repec.org/RePEc:wly:apsmbi:v:36:y:2020:i:1:p:124-142

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