Out-of-sample experiments cast doubt on the ability of portfolio optimising strategies to outperform equally weighted portfolios, when investors have a 1-month time horizon. This paper examines whether this finding holds for longer investment horizons over which the optimising strategy exploits linear predictability in returns. Our experiments indicate that investors with longer horizons on average would have benefited, ex post, from an optimising strategy over the period 1995–2009. We analyse performance sensitivity to investor risk aversion, to the number of predictors included in the forecasting model and to the deduction of transaction costs from portfolio performance.

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