IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Sensitivity Analysis for Mean-Variance Portfolio Problems

Listed author(s):
  • Michael J. Best

    (Department of Combinatorics and Optimization, University of Waterloo, Waterloo, Ontario, N2L 3G1 Canada)

  • Robert R. Grauer

    (Department of Economics, Faculty of Business Administration, Simon Fraser University, Burnaby, British Columbia, V5A 1S6 Canada)

Registered author(s):

    This paper shows how to perform sensitivity analysis for Mean-Variance (MV) portfolio problems using a general form of parametric quadratic programming. The analysis allows an investor to examine how parametric changes in either the means or the right-hand side of the constraints affect the composition, mean, and variance of the optimal portfolio. The optimal portfolio and associated multipliers are piecewise linear functions of the changes in either the means or the right-hand side of the constraints. The parametric parts of the solution show the rates of substitution of securities in the optimal portfolio, while the parametric parts of the multipliers show the rates at which constraints are either tightening or loosening. Furthermore, the parametric parts of the solution and multipliers change in different intervals when constraints become active or inactive. The optimal MV paths for sensitivity analyses are piecewise parabolic, as in traditional MV analysis. However, the optimal paths may contain negatively sloping segments and are characterized by types of kinks, i.e., points of nondifferentiability, not found in MV analysis.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 37 (1991)
    Issue (Month): 8 (August)
    Pages: 980-989

    in new window

    Handle: RePEc:inm:ormnsc:v:37:y:1991:i:8:p:980-989
    Contact details of provider: Postal:
    7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA

    Phone: +1-443-757-3500
    Fax: 443-757-3515
    Web page:

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:37:y:1991:i:8:p:980-989. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.