# Questions tagged [mean-variance]

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### Smart transaction cost model (for spread contracts)

In futures there exist exchange traded calendar spread contracts, which trade as a single unit (think May/June Crude Oil). The bid ask spread for the spread contracts is the same as that of the ...
288 views

### Mean Variance Optimization of 2000 pairs of securities (Python)

I would like to take the opportunity to ask for your help on an assignment I'm trying to complete. For this 'Modern Robo Advisory' course we are asked to solve a (target) goal-based investment ...
56 views

### How to find beta from the information given? [closed]

This is an exam question. I know that to find beta I need the covariance between the portfolio and asset A but don't know how to find it.
106 views

### “Porting” an alpha strategy to a different benchmark

I'm reading about the mean-variance optimization of active portfolios. A bit of prior background from the book I'm reading: the author discusses the mean-variance optimal portfolios without cash, ...
118 views

### Economic intuition behind pricing cash flow

I read the book of Skiadas Asset Pricing Theory 2009. I don't quite understand what does mean pricing cash flow. In the book it's written: $\textbf{Definition 2.9}$ A cash flow $x^*$ is a pricing ...
420 views

### Generalized Mean Variance Portfolio

Utility based portfolio optimization deals with the problem of finding the optimal portfolio $x_T$ by maximizing the utility/objective function $O(x_T,x_0)$ where $x_0$ is the current portfolio. In ...
2k views

### mean variance optimization vs max sharpe ratio

I keep reading/hearing that the results from mean-var optimization is max Sharpe ratio. It seems making sense if you fix either target return or target risk, but in general, it doesn't seems right, ...
339 views

### Trouble computing the VaR for Student's t-distribution for a minimum-variance portfolio composed of four cryptocurrencies (BTC, ETH, LTC, and XMR)

I have modelled the time-series of daily log-returns from August 2015 to October 2017 of a minimum-variance portfolio composed of four cryptocurrencies (BTC, ETH, LTC, XMR) by fitting the data to four ...
161 views

### Solving a system of two equations with non-convex matrix multiplication for MV optimization

Scenario: I am trying to do a variation of the MV optimization for a portfolio. In this instance, I already have a vector of mean returns ($\mu$), a vector of ones, a covariance matrix ($\Sigma$), and ...
101 views

### Units of Risk: Variance vs Standard Deviation

Suppose you are trading two mean-reverting assets, A and B, and that $Covar(A, B) > 0$. You are currently long one unit of A, and are considering buying one unit of B. Compared to the situation ...
4k views

### Why does the Markowitz mean-variance model require the assumption of normality?

Given $N$ assets, the Markowitz mean-variance model requires expected returns, expected variances and a $N \times N$ covariance matrix. The joint distribution is fully defined by these measures. ...
180 views

### Help on minimum variance optimization on U.S. Equity/Bond ETFs - Intuition

I run a MVP on 10 ETFs: SPY, SDY, IWB, XLP, VGT, BND, XLF, IJR, XLY, XLI from 2008 to 2016 on monthly return data. The weighs array (I am using a MATLAB function "Portfolio" - constraints are simple: ...
49 views

### How to hedge a MV portfolio against crises

I have constructed an adjusted Mean-Variance portfolio optimization method that optimizes the exposure in a set of X assets. The portfolio works perfectly fine during normal periods (even when there ...
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### Mean and standard deviation of price series with Kalman

I like to calculate the mean and standard deviation of a price series, using the Kalman filter. I am somehow stuck with the deviation, or have some problem in understanding, which my research could ...
3k views

### Mean Variance portfolio optimisation (Long Only) CVXPY including cardinality constraint

I am working on a portfolio optimisation that requires me to constrain on the number of assets used, e.g from S&P500 build a 20 asset portfolio that is feasible. After doing some research I came ...
118 views

### Relation between mean and variance of a portfolio in modern portfolio theory:

I hope that this is the right place to ask my question! Let a market with $N\ge1$ risky assets and denote by $(R_i,i=1,\cdots, N)$ their returns and $R$ the vector of these $N$ returns. In addition, ...
126 views

### Should the number of Markowitz Optimization steps be counted as backtest trials?

I'm backtesting a strategy that involves monthly investments in a few stocks out of a given set, that is, each month some of the stocks are shortlisted from an index and a long position is taken in ...
660 views

### Dollar-Neutral in addition to Market-Neutral?

What is the point/benefit of using a dollar-neutral strategy in addition to a Beta-neutral strategy? What exactly does a dollar-neutral strategy buy the investor? What's useful about balancing long ...
318 views

### Minimum Variance Portfolio problem [closed]

Minimum Variance Portfolio Suppose there are N stocks in the investmentable universe and we have a fully invested portfolio investing 100% of the capital. The Covariance matrix is denoted as ∑. We ...
73 views

### Are financial returns considered more volatile in recessionary times as opposed to expansionary times?

I need help in understanding some results that I have obtained. I am doing some out-of-sample performance analysis for different targets of volatility in mean-variance optimization where I solely ...
633 views

### Modelling log-returns and calculating the portfolio return

I know this might be a trivial question, however, I would be grateful for some clarification. I am working on weekly log-return data, doing volatility-foracasting using GARCH models and then using ...
444 views

### Is this realized “efficient” frontier reasonable?

I have performed some out-of-sample analysis of mean-variance optimization with monthly rebalancing. Studying the "realized efficient frontier", I am worried that something is wrong. Since the ...
1k views

### Monte Carlo based mean variance optimization

I was asked this question in an interview some years ago. It struck me as a poorly formed question. I thought I would put it out there to the community to see if I just simply missed something. ...
33 views

### Are Variances generally stable for any given instrument?

My hesitation, as I look at getting into forecasting based on observed variances, is the nagging question - if variances are not constant per-instrument, is it any good to use the last month or year's ...