# Tag Info

Accepted

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

it doesn't require normality. What it requires is that the investor's decisions are determined by mean and variance. A normal distribution is determined by mean and variance, so if you assume joint ...
• 6,973
Accepted

### What does the concept "standard Markowitz approach" include?

The Markowitz mean-variance model is the basis for many extensions and portfolio solutions that have been discovered over the years: The standard model (Markowitz, 1952, 1959) originally only ...
• 3,000

• 6,663
Accepted

• 6,954

### Utility Theory and Mean Variance Analysis

Theoretically: no. For most practical purposes: yes; given that risks are small risks, see these lecture notes on p76. Belows's the background and one example showing you why you can run into ...
• 6,663

### Covariance Between Two Frontier Portfolios

Let $\Sigma$ denote the covariance matrix of our asset universe, $\mu$ is the vector of expected returns. Further, $\mathbb{1}$ is a vector of ones. Let's identify the vector of the minimum variance ...
• 6,663

### What is the mathematical difference between Mean-Variance Optimization and CAPM?

The CAPM is an asset pricing model, while mean-variance optimization is a type of optimization. These are objects from two different categories. When you characterize the CAPM as an optimization ...
• 3,156
Accepted

### Economic intuition behind pricing cash flow

All that's going on here are essentially consequences of a linear pricing function. That asset prices should be linear in their payoffs makes intuitive economic sense: the value of a basket of ...
• 6,954

### Is this realized "efficient" frontier reasonable?

Nothing is "wrong," in the sense that your findings are out of line, but there is a very deep issue that is wrong. I have written a set of papers on this. Since you are not a student, but someone ...
• 4,299
Accepted

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

In a quick and easy first step you could add $L_1$-regularization to the Markowitz problem. That is, you add a term $\lambda ||w||_1$ to the goal function of your optimization problem (where $w$ are ...
• 348
Accepted

### Methods for superior estimates of returns in m.v. portfolio optimization

Expected returns are very difficult to estimate reliably without incurring estimation error as found out by Merton (1980) "On estimating the expected return on the market". This is why estimating ...
• 3,000

### Tangency portfolio with two additional constraints so that portfolio weights are unconstrained

Yes there are two ways to solve the tangency portfolio: closed-form analytical solution optimization problem (maximization of the Sharpe ratio) The closed-form analytical solution you incorrectly ...
• 3,000
Accepted

### Monte Carlo (resampling) in m.v. portfolio optimization

There might be some differences in how we define things, but there should be only one set of assumptions (i.e., for each asset, there should be only one expected return and expected volatility). Your ...
• 11.7k
Accepted

### Any portfolio models not based on asset return moments?

Remember that asset returns are there because of the expected utility theory. More precisely, as long as you can assume a "reasonable" expected utility function to be approximated by a quadratic ...
• 393