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6
votes
2answers
2k views

Comparing MVO with Resampled Efficient Frontier

My question: How can I compare the Resampled Frontier (REF) to the standard MVO frontier when I have been provided with $\mu$, $\Omega$, and don't have access to true future data to test real out of ...
17
votes
5answers
3k views

What methods do you use to improve expected return estimates when constructing a portfolio in a mean-variance framework?

One of the main problems when trying to apply mean-variance portfolio optimization in practice is its high input sensitivity. As can be seen in (Chopra, 1993) using historical values to estimate ...
3
votes
3answers
9k views

Derivation of the tangency (maximum Sharpe Ratio) portfolio in Markowitz Portfolio Theory?

I have seen the following formula for the tangency portfolio in Markowitz portfolio theory but couldn't find a reference for derivation, and failed to derive myself. If expected excess returns of $N$ ...
4
votes
1answer
2k views

Michaud's Resampled Efficient Frontier - Out of Sample Simulation Testing

I will be putting ALL my account points on bounty to whoever answers this question [if your answer is crap but it's the only answer, you're getting the 165 points]. You will have to wait 2 days or so ...
10
votes
1answer
394 views

Portfolios from Sorts

Some time ago Almgren and Chriss proposed a method for portfolio optimization based on sorting criteria such as $r_1 > r_2 >... > r_N$ instead of explicit expected returns: see portfolios ...
4
votes
2answers
4k views

Typical risk aversion parameter value for mean-variance optimization?

What are typical values for risk aversion parameters $\lambda$ used in mean-variance optimization? Please provide references. Just to be clear, I'm talking about the $\lambda$ in $U(w) = w'\mu - ...
1
vote
1answer
400 views