Robust Portfolio Selection
AbstractIn this paper, we discuss one of the reasons leading practitionners to the rejection of the Markowitz model and propose a new stastistical method to avoid this problem. To be more precise, we discuss the problem of statistical robustness of the Markowitz optimizer and show that the latter is not robust, meaning that a few extreme assets prices or returns can lead to irrelevant 'optimal' portfolios. We then propose a robust Markowitz optimizer and show that it is far more stable than the classical version.
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Bibliographic InfoPaper provided by Ecole des Hautes Etudes Commerciales, Universite de Geneve- in its series Papers with number 2000.14.
Length: 17 pages
Date of creation: 2000
Date of revision:
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INVESTMENTS ; MODELS ; STATISTICAL ANALYSIS ; PRICES;
Find related papers by JEL classification:
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
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- Cédric Perret-Gentil & Maria-Pia Victoria-Feser, 2003. "Robust Mean-Variance Portfolio Selection," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva 2003.02, Institut d'Economie et Econométrie, Université de Genève.
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