Mean--variance portfolio optimization when means and covariances are unknown

Preprint, Other literature type OPEN
Tze Leung Lai; Haipeng Xing; Zehao Chen;
(2011)
  • Publisher: The Institute of Mathematical Statistics
  • Journal: issn: 1932-6157
  • Related identifiers: doi: 10.1214/10-AOAS422
  • Subject: Statistics - Applications | empirical Bayes | Quantitative Finance - Portfolio Management | Markowitz’s portfolio theory | efficient frontier | stochastic optimization

Markowitz's celebrated mean--variance portfolio optimization theory assumes that the means and covariances of the underlying asset returns are known. In practice, they are unknown and have to be estimated from historical data. Plugging the estimates into the efficient f... View more
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