• The quality of a Mean-variance preference portfolio advice depends on the quality of the

inputs mu **and Sigma.

• In the long-run, investors with the more precise estimates for mu **and Sigma will outperform the market.

"How severe is the Problem?"

(A) For n = 50 assets you need 1,325 parameter estimates.

(B) For n = 100 assets you need 5,150 parameter estimates.

(C) For n = 3000 assets you more than 4.5 million estimates.