Notional portfolios and normalized linear returns
Portfolio Management
2011-04-29 v1
Abstract
The vector of periodic, compound returns of a typical investment portfolio is almost never a convex combination of the return vectors of the securities in the portfolio. As a result the ex post version of Harry Markowitz's "standard mean-variance portfolio selection model" does not apply to compound return data. We propose using notional portfolios and normalized linear returns to remedy this problem.
Cite
@article{arxiv.1104.5393,
title = {Notional portfolios and normalized linear returns},
author = {Vic Norton},
journal= {arXiv preprint arXiv:1104.5393},
year = {2011}
}