I am in academia and begin to work on topics including portfolio optimization. I just read lots of paper discussing different extensions to the Markowitz approach, given different (possibly unrealistic) assumptions. Since it is an old method and I am away from the real finance organization, some facts from the real work might help our research a lot. I am just curious about:
- Is Markowitz mean-variance portfolio still widely used in companies?
- If yes to 1, it is well-known that Markowitz is prone to noise, for example, will large assets pools. Do you care about or really use those fancy method in papers?
- Many recent papers just consider the simplest mean-variance problem, i.e., without constraints or transaction costs. Is this practical? For example, in reality, do we need to first specify that, the exposure to certain a factor/sector should be among a range? Or what's the most commonly-required constraints, are they linear equality/inequality/ non-convex? Do they come from the government/investor, or simply the analyst's belief that they are helpful or easy to communicate with shareholders?
We academia researchers know some fancy tools, but I really want to stay close to the real needs. Thank you!