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An Analytic Derivation of the Efficient Portfolio Frontier
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It is shown that under certain conditions, the classic graphical technique for deriving the efficient portfolio frontier is incorrect and the most important implication derived from these characteristics, the separation theorem, is stated and proved in the context of a mutual fund theorem.Abstract:
The characteristics of the mean-variance, efficient portfolio frontier have been discussed at length in the literature. However, for more than three assets, the general approach has been to display qualitative results in terms of graphs. In this paper, the efficient portfolio frontiers are derived explicitly, and the characteristics claimed for these frontiers are verified. The most important implication derived from these characteristics, the separation theorem, is stated and proved in the context of a mutual fund theorem. It is shown that under certain conditions, the classic graphical technique for deriving the efficient portfolio frontier is incorrect.read more
Citations
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References
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The valuation of risk assets and the selection of risky investments in stock portfolios and capital budgets
TL;DR: In this article, the problem of selecting optimal security portfolios by risk-averse investors who have the alternative of investing in risk-free securities with a positive return or borrowing at the same rate of interest and who can sell short if they wish is discussed.
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Portfolio Selection: Efficient Diversification of Investments
Alan Stuart,Harry M. Markowitz +1 more
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