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The answer is sort of. I am going to provide you a history of the mathematics so that you will understand why this discussion is challenging to have in economics. Also, you are probably going to have to ground yourself in math you haven’t looked at before. In 1867, a young man by the name of Jules Regnault became the world’s first quant, publishing a book ...


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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 function, you will always end up with some mean-variance tradeoff in wealth allocation. You want to base portfolio allocations on different quantities? Hypothesize ...


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Some allocation approaches that are not based on moments - Fixed weight strategies (e.g. 60/40 or equal weight) Allocation proportional to market capitalisation (often called passive investing or indexing) or proportional to some other measure of size, like book value or sales (often called fundamental indexing) Building long-short portfolio using terciles, ...


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The intuition that "if I have an N stock portfolio and an (N+1)th stock becomes available, buying some of it will lower portfolio variance" is not correct. It is true if all stocks are uncorrelated, or if stock correlations are low. But it can fail in general, as the example given in your book demonstrates. Suppose you initially invest in stocks 2,3,4. The ...


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In its strict form, "mean-variance" is a sub-component, albeit the default normative one, of the "standard Markowitz approach". Just like eg there are lots of regression techniques out there; but OLS is by far the default one. Markowitz simply put on the table a method of working out expected portfolio risk from expected asset volatility and expected ...


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