Quadratic Programming Applied to Modern Portfolio Selection
نویسنده
چکیده
The mean-variance formulation by Markowitz in 1956 and its efficient solution by Wolfe in 1959 paved a foundation for modern portfolio selection. In this work we start reviewing basic concepts about portfolio selection, showing one starting solution and then the mean-variance analysis proposed by Markowitz. We show an algorithm for efficient frontier derivation, proposed by Wolfe, and analyze the performance of 24 portfolios generated by our implementation of this method, 12 of then in a bull market and the other 12 in a bear market. After that we finish our work presenting some limitations of this formulation and recent studies where preference for skewness is introduced. Another nonlinear models are also suggested.
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