On the hellwig method of feasible portfolio construction

Andrzej Kokoszkiewicz and Michał Kolupa

International Advances in Economic Research, 1997, vol. 3, issue 4, 376-383

Abstract: The work feasible portfolio is built into the work, that is, the k-dimensional Q column vector with components q i where q i ≥ 0 for i=1,...,k and q 1 +...+q k =1. We define i=1,...,k in the following way: $$q_1 =\frac{{r_i^2 }}{{1 - r_i^2 }}A^{ - 1} $$ , where: $$r_i =r(R_i ,R_M ) {\text{and}} A=\sum\limits_{i=1}^k {\frac{{r_i^2 }}{{1 - r_i^2 }}} $$ . It is indicated that if r i >r j , then q i >q j and, moreover, the q i =t i b i 2 relation occurs between q i and b i estimators of parameters of characteristic line: $$R_i =\alpha _i + \beta _i R_M + e_i (i=1,...,k)$$ , where t i is a certain constant. The effective formulas for a profit rate and risk of the constructed feasible portfolio are given. Copyright International Atlantic Economic Society 1997

Date: 1997
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DOI: 10.1007/BF02295215

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