An Algorithm for Deriving the Capital Market Line

Gordon Alexander

Management Science, 1977, vol. 23, issue 11, 1183-1186

Abstract: This paper examines the problem of deriving the tangent (or market) portfolio from a given set of risky assets and a specified risk-free borrowing and lending rate. Deriving the tangent portfolio involves solving a mathematical programming problem which can be specified as the minimization of a quadratic objective function with linear constraints. The complementary pivot algorithm has previously been shown to be capable of deriving the optimal solution to certain quadratic programming problems, subject to a nonnegativity constraint. This paper demonstrates that the algorithm can be used to derive the tangent portfolio and that the nonnegativity constraint does not pose any serious handicap. Furthermore, it is shown that the algorithm can efficiently solve large-scale problems of this nature.

Date: 1977
References: Add references at CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.23.11.1183 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:23:y:1977:i:11:p:1183-1186

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().