Applying Markowitz's Critical Line Algorithm

Andras F. Niedermayer and Daniel Niedermayer

Diskussionsschriften from Universitaet Bern, Departement Volkswirtschaft

Abstract: We provide a Matlab quadratic optimization tool based on Markowitz's critical line algorithm that significantly outperforms standard software packages and a recently developed operations research algorithm. As an illustration: For a 2000 asset universe our method needs less than a second to compute the whole frontier whereas the quickest competitor needs several hours. This paper can be considered as a didactic alternative to the critical line algorithm such as presented by Markowitz and treats all steps required by the algorithm explicitly. Finally, we present a benchmark of different optimization algorithms' performance.

Keywords: finance; portfolio selection; efficient frontier; critical line algorithm; quadratic optimization; numerical methods (search for similar items in EconPapers)
JEL-codes: C15 C61 C63 G11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cmp
Date: 2007-01
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Related works:
Working Paper: Applying Markowitz's Critical Line Algorithm (2006)
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Persistent link: http://EconPapers.repec.org/RePEc:ube:dpvwib:dp0701

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