Journal ArticleDOI
Portfolio Optimization with Factors, Scenarios, and Realistic Short Positions
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This paper presents fast algorithms for calculating mean-variance efficient frontiers when the investor can sell securities short as well as buy long, and when a factor and/or scenario model of covariance is assumed.Abstract:
This paper presents fast algorithms for calculating mean-variance efficient frontiers when the investor can sell securities short as well as buy long, and when a factor and/or scenario model of covariance is assumed. Currently, fast algorithms for factor, scenario, or mixed (factor and scenario) models exist, but (except for a special case of the results reported here) apply only to portfolios of long positions. Factor and scenario models are used widely in applied portfolio analysis, and short sales have been used increasingly as part of large institutional portfolios. Generally, the critical line algorithm (CLA) traces out mean-variance efficient sets when the investor's choice is subject to any system of linear equality or inequality constraints. Versions of CLA that take advantage of factor and/or scenario models of covariance gain speed by greatly simplifying the equations for segments of the efficient set. These same algorithms can be used, unchanged, for the long-short portfolio selection problem provided a certain condition on the constraint set holds. This condition usually holds in practice.read more
Citations
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Journal ArticleDOI
Market Efficiency: A Theoretical Distinction and So What?
TL;DR: The authors showed that when one particular, clearly unrealistic CAPM assumption is replaced by a more real-world version, some of the dramatic, practical conclusions of CAPM no longer follow.
Journal ArticleDOI
Possibilistic mean-variance models and efficient frontiers for portfolio selection problem
TL;DR: It is assumed that the rates of return on assets can be expressed by possibility distributions rather than probability distributions, and the notions of lower and upper possibilistic efficient portfolios are introduced.
Journal ArticleDOI
Portfolio Theory: As I Still See It
TL;DR: The authors summarizes the foundations of portfolio theory and its applications to current issues, such as the choice of criteria for practical risk return analysis, and whether some form of risk-return analysis should be used in fact.
Journal ArticleDOI
Portfolio rebalancing model using multiple criteria
Jinhong Yu,Wen-Yi Lee +1 more
TL;DR: Five portfolio rebalancing models, with consideration of transaction cost and consisting of some or all criteria, including risk, return, short selling, skewness, and kurtosis, are compared to determine the important design criteria for a portfolio model.
Journal ArticleDOI
An Improved Estimation to Make Markowitz's Portfolio Optimization Theory Users Friendly and Estimation Accurate with Application on the US Stock Market Investment
TL;DR: This paper derives explicit formulas for the estimator of the optimal portfolio return and shows that the proposed estimators dramatically outperform traditional estimators for both the optimal return and its corresponding allocation under different values of p/n ratios and different inter-asset correlations.
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