Nick Motson

Optimal Sharpe Ratio Portfolios and the Role of Perfect Foresight in Returns, Volatilities, and Correlations

Using 50 years of monthly data on the 1,000 largest US equities, this article examines the relative importance of security selection, volatility, and correlations in determining portfolio efficiency. We introduce the Optimal Sharpe Ratio (OSR) portfolio, a boundary-condition fram...