• Predictive regressions
• bayes
• optimization
• Estimation risk
• asset allocation
• predicting returns
• stock index

Into a portfolio allocation problem, it’s considered a rationale Buy and Hold investor who takes investment decisions at the start of his horizon, holding the allocation fixed till to the end of it. His investment decisions are taken among two asset classes: between stocks and cash (earning a riskless rate). The aim of the work is to obtain an optimal allocation (ω) to the stock index and residually (1-ω) to the free risk asset. Presenting this approach as an alternative one to the ‘’Mean Variance’’ Markowitz approach, it is developed the maths and are obtained the results.