@article {Ardia68, author = {David Ardia and Kris Boudt}, title = {Implied Expected Returns and the Choice of a Mean{\textendash}Variance Efficient Portfolio Proxy}, volume = {41}, number = {4}, pages = {68--81}, year = {2015}, doi = {10.3905/jpm.2015.41.4.068}, publisher = {Institutional Investor Journals Umbrella}, abstract = {Implied expected returns are the expected returns for which a supposedly mean{\textendash}variance efficient portfolio is effectively efficient, given a covariance matrix. The authors analyze the properties of monthly implied expected stock returns and study their sensitivity to the choice of mean{\textendash}variance efficient portfolio proxy. For the universe of S\&P 100 stocks over the period from 1984 to 2014, they find that using as risk-based portfolio proxy with respect to a market capitalization or fundamental value portfolio brings its biggest gains in return forecasts{\textquoteright} stability and precision. For all the proxies considered, they report that the implied expected returns outperform forecasts based on a time-series model in stability and precision.TOPICS: Portfolio management/multi-asset allocation, factor-based models, mutual funds/passive investing/indexing}, issn = {0095-4918}, URL = {https://jpm.pm-research.com/content/41/4/68}, eprint = {https://jpm.pm-research.com/content/41/4/68.full.pdf}, journal = {The Journal of Portfolio Management} }