A Simple Algorithm for Stone's Version of the Portfolio Selection Problem

James V. Jucker and Clovis de Faro

Journal of Financial and Quantitative Analysis, 1975, vol. 10, issue 5, 859-870

Abstract: More than twenty years ago the portfolio selection problem was stated as a parametric quadratic programming problem [3]. Since that time there has been an ongoing search for methods that would allow reductions in both the data and the computational effort required to implement the Markowitz formulation. Markowitz himself developed a special algorithm for the problem [4] Sharpe followed with his famous diagonal model [6], a linear programming approximation for the special case of mutual funds [7], and a linear programming approximation for the general problem [0]. And during this period there were substantial advances in quadratic programming computer codes. A very fast code is now widely available [1], but the size of the code itself (a listing of the annotated program runs to more than 3,000 lines) makes its everyday use for portfolio selection somewhat unattractive.

Date: 1975
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