Unbiased and Consistent Sparse Asset Allocation
A Basket Half Full: Sparse Portfolios
We develop a novel strategywhich produces unbiased and consistent sparse allocations.We demonstrate that: (1) failing to correct for the bias leads to low out-of-sample portfolioreturn ; (2) only sparse portfolios achieved positive cumulative return during several economic downturns, including the dot-com bubble of 2000, the financial crisis of 2007-09, and the covid-19 outbreak.
