Abstract—Modern Portfolio Theory (MPT) according to Markowitz states that investors form mean-variance efficient portfolios which maximizes their utility. Markowitz proposed the standard deviation as a simple measure for portfolio risk and the lower semi-variance as the only risk measure of interest to rational investors. This paper uses a third volatility estimator based on intraday data and c...

For many image processing applications, the aim is to detect a certain event or occurrence in a noisy data set. Several algorithms may exist that solve the detection problem. An example is the detection of edges. The subsequent difficulty then is how to select a proper weighting scheme for the algorithms so that the results are combined optimally. To achieve proper fusion of detection outputs, ...

Based on recent theoretical and empirical results about the significance of Cumulative Prospect Theory (CPT), we define RWcSD, an extended notion of stochastic dominance that accounts for both the reflection effect (R) and the probability weighting (Wc). A second definition of stochastic dominance (R∗W -SD) for preferences with reverse reflection effect (R*) as in Markowitz (1952) is presented....

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...

Portfolio management starts with asset allocation. There is a consensus that asset allocation plays an important role in determining portfolio performance (Arshanapalli, Coggin & Nelson, 2001). Active portfolio management implies the rebalancing of the existing portfolio by buying and selling assets. The aim of rebalancing is to improve the performance of the managed portfolio by adjusting it t...

We recommend an implementation of the Markowitz problem to generate stable portfolios with respect to perturbations of the problem parameters. The stability is obtained proposing novel calibrations of the covariance matrix between the returns that can be cast as convex or quasiconvex optimization problems. A statistical study as well as a sensitivity analysis of the Markowitz problem allow us t...

The amount of fill-in occurring in the factorization can vary from zero to complete fill, and can be controlled by specifying either the maximum level of fill LFILL, or the drop tolerance DTOL. The factorization may be modified in order to preserve row sums, and the diagonal elements may be perturbed to ensure that the preconditioner is positive-definite. Diagonal pivoting may optionally be emp...