The efficient frontier for bounded assets |
| |
Authors: | Michael J Best Jaroslava Hlouskova |
| |
Institution: | (1) Department of Combinatorics and Optimization, University of Waterloo, Waterloo, Ontario N2L 3G1, Canada (e-mail: mjbest@math.uwaterloo.ca), CA;(2) Research Associate, Department of Economics and Finance, Institute for Advanced Studies, Stumpergasse 56, A-1060, Vienna, Austria, AT |
| |
Abstract: | This paper develops a closed form solution of the mean-variance portfolio selection problem for uncorrelated and bounded assets when an additional technical assumption is satisfied. Although the assumption of uncorrelated assets is unduly restrictive, the explicit determination of the efficient asset holdings in the presence of bound constraints gives insight into the nature of the efficient frontier. The mean-variance portfolio selection problem considered here deals with the budget constraint and lower bounds or the budget constraint and upper bounds. For the mean-variance portfolio selection problem dealing with lower bounds the closed form solution is derived for two cases: a universe of only risky assets and a universe of risky assets plus an additional asset which is risk free. For the mean-variance portfolio selection problem dealing with upper bounds, the results presented are for a universe consisting only of risky assets. In each case, the order in which the assets are driven to their bounds depends on the ordering of their expected returns. |
| |
Keywords: | : Parametric quadratic programming mean-variance portfolio selection efficient frontier capital market line |
本文献已被 SpringerLink 等数据库收录! |
|