Markowitz Mean-Variance Optimization

Clifford S. Ang ()
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Clifford S. Ang: Compass Lexecon

Chapter 7 in Analyzing Financial Data and Implementing Financial Models Using R, 2015, pp 209-240 from Springer

Abstract: Abstract This chapter discusses mean-variance optimization based on the work of Markowitz. The idea is for us to find portfolios that provide the highest expected return for a given level of risk. We demonstrate the intuition of identifying mean-variance efficient portfolios and construction of the mean-variance efficient frontier through a simple two-asset example. We then show how to use quadratic programming to extend the two-asset portfolio to a multi-asset portfolio.

Keywords: Quadratic Programming; Efficient Frontier; Sharpe Ratio; Short Selling; Monthly Return (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sptchp:978-3-319-14075-9_7

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DOI: 10.1007/978-3-319-14075-9_7

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