Related papers: The Sherman-Morrison-Markowitz Portfolio
This paper studies a robust continuous-time Markowitz portfolio selection pro\-blem where the model uncertainty carries on the covariance matrix of multiple risky assets. This problem is formulated into a min-max mean-variance problem over…
We introduce a novel approach to portfolio optimization that leverages hierarchical graph structures and the Schur complement method to systematically reduce computational complexity while preserving full covariance information. Inspired by…
Recent studies stressed the fact that covariance matrices computed from empirical financial time series appear to contain a high amount of noise. This makes the classical Markowitz Mean-Variance Optimization model unable to correctly…
Markowitz's celebrated mean--variance portfolio optimization theory assumes that the means and covariances of the underlying asset returns are known. In practice, they are unknown and have to be estimated from historical data. Plugging the…
In the paper, we consider three quadratic optimization problems which are frequently applied in portfolio theory, i.e, the Markowitz mean-variance problem as well as the problems based on the mean-variance utility function and the quadratic…
Since Markowitz's mean-variance framework, optimizing a portfolio that maximizes the profit and minimizes the risk has been ubiquitous in the financial industry. Initially, profit and risk were measured by the first two moments of the…
We consider the problem of portfolio selection within the classical Markowitz mean-variance framework, reformulated as a constrained least-squares regression problem. We propose to add to the objective function a penalty proportional to the…
The Markowitz mean-variance portfolio optimization model aims to balance expected return and risk when investing. However, there is a significant limitation when solving large portfolio optimization problems efficiently: the large and dense…
We consider an incomplete market with a nontradable stochastic factor and a continuous time investment problem with an optimality criterion based on monotone mean-variance preferences. We formulate it as a stochastic differential game…
The asymptotic distribution of the Markowitz portfolio is derived, for the general case (assuming fourth moments of returns exist), and for the case of multivariate normal returns. The derivation allows for inference which is robust to…
More than seventy years ago Harry Markowitz formulated portfolio construction as an optimization problem that trades off expected return and risk, defined as the standard deviation of the portfolio returns. Since then the method has been…
Selecting the optimal Markowitz porfolio depends on estimating the covariance matrix of the returns of $N$ assets from $T$ periods of historical data. Problematically, $N$ is typically of the same order as $T$, which makes the sample…
Traditional Markowitz portfolio optimization constrains daily portfolio variance to a target value, optimising returns, Sharpe or variance within this constraint. However, this approach overlooks the relationship between variance at…
Motivated by recent advances in the spectral theory of auto-covariance matrices, we are led to revisit a reformulation of Markowitz' mean-variance portfolio optimization approach in the time domain. In its simplest incarnation it applies to…
It is widely recognized that when classical optimal strategies are applied with parameters estimated from data, the resulting portfolio weights are remarkably volatile and unstable over time. The predominant explanation for this is the…
This paper proposes a new method for financial portfolio optimization based on reducing simultaneous asset shocks across a collection of assets. This may be understood as an alternative approach to risk reduction in a portfolio based on a…
In the present paper, we derive a closed-form solution of the multi-period portfolio choice problem for a quadratic utility function with and without a riskless asset. All results are derived under weak conditions on the asset returns. No…
Monotone mean-variance (MMV) utility is the minimal modification of the classical Markowitz utility that respects rational ordering of investment opportunities. This paper provides, for the first time, a complete characterization of optimal…
Portfolio optimization emerged with the seminal paper of Markowitz (1952). The original mean-variance framework is appealing because it is very efficient from a computational point of view. However, it also has one well-established failing…
In his famous paper, Markowitz (1952) derived the dependence of portfolio random returns on the random returns of its securities. This result allowed Markowitz to obtain his famous expression for portfolio variance. We show that Markowitz's…