Abstract
This chapter focuses on the econometric treatment of portfolio choice problems. The goal is to describe, discuss, and illustrate through examples the different econometric approaches proposed in the literature for relating the theoretical formulation and solution of a portfolio choice problem to the data. In focusing on the econometrics of the portfolio choice problem, this chapter is at best a cursory overview of the broad portfolio choice literature. Much of the discussion is focused on the single-period portfolio choice problem with standard preferences, normally distributed returns, and frictionless markets. There are many recent advances in the portfolio choice literature. The econometric techniques discussed in this chapter can be applied to realistic formulations. It also discusses a number of modeling issues and extensions that arise in formulating the problem.
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