General Markowitz Optimization Problems

Markowitz versus Michaud : Portfolio Optimization Strategies Reconsidered

Several attempts have been made to reduce the impact of estimation errors on the optimal portfolio composition. On the one hand, improved estimators of the necessary moments have been developed and on the other hand, heuristic methods have been generated to enhance the portfolio performance, for instance the "resampled efficiency" of Michaud (1998). We compare the out-ofsample performance of tr...

Markowitz optimization: correcting past out-of-sample errors

Portfolio optimization inputs differ widely from their subsequent out-of-sample (OOS) values. As a result, optimized portfolios have 2 to 28 times more risk OOS than their ex-ante estimates suggest. I propose a simple solution to this problem: let the data speak for itself and pick, in real time, the correction that most reduces past OOS errors. The resulting optimized portfolios consistently o...

Peculiarities of Application of Direct and Inverse Eventological Markowitz' Problems

Determination the Parameters of Markowitz Portfolio Optimization Model

The main purpose of this study is the determination of the optimal length of the historical data for the estimation of statistical parameters in Markowitz Portfolio Optimization. We present a trading simulation using Markowitz method, for a portfolio consisting of foreign currency exchange rates and selected assets from the Istanbul Stock Exchange ISE 30, over the period 2001-2009. In the simul...

Some problems with the Markowitz mean-variance model

Harry Markowitz’s mean-variance model for portfolio choice posits a linear relationship between the return of a portfolio and the returns of its component securities. This linear relationship does not hold in an ex post setting when monthly or quarterly returns are used. 1 The Standard Portfolio Selection Model Harry Markowitz begins Mean-Variance Analysis in Portfolio Choice and Capital Market...