Prediction is not optimization

Many researchers and practitioners have questioned how the input parameters of MVO should be estimated. To this, Markowitz is said to have responded with wit and grace, “That’s your job, not mine.”

- Stephen C Sexauer and Laurence B Siegel. 2024. Harry Markowitz and the philosopher’s stone. Financial Analysts Journal

With the quant revolution, there have been significant advancements in the methods and types of optimization that can be used for portfolio management. However, the key to successful optimization remains the accurate predictions of expected return, volatility, and correlation. Optimization on the wrong inputs is a fool's errand. 

The machine learning explosion has to focus on system predictions across a large set of assets, which can then be used as inputs into a traditional optimizer. Before using an optimizer, focus on the input variables.