On the equivalence of quadratic optimization problems commonly used in portfolio theory

Taras Bodnar, Nestor Parolya and Wolfgang Schmid

European Journal of Operational Research, 2013, vol. 229, issue 3, 637-644

Abstract: In the paper, we consider three quadratic optimization problems which are frequently applied in portfolio theory, i.e., the Markowitz mean–variance problem as well as the problems based on the mean–variance utility function and the quadratic utility. Conditions are derived under which the solutions of these three optimization procedures coincide and are lying on the efficient frontier, the set of mean–variance optimal portfolios. It is shown that the solutions of the Markowitz optimization problem and the quadratic utility problem are not always mean–variance efficient.

Keywords: Investment analysis; Mean–variance analysis; Parameter uncertainty; Interval estimation; Test theory (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (16)

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Working Paper: On the Equivalence of Quadratic Optimization Problems Commonly Used in Portfolio Theory (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:229:y:2013:i:3:p:637-644

DOI: 10.1016/j.ejor.2013.03.002

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