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Notional portfolios and normalized linear returns

  • Vic Norton
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    The vector of periodic, compound returns of a typical investment portfolio is almost never a convex combination of the return vectors of the securities in the portfolio. As a result the ex post version of Harry Markowitz's "standard mean-variance portfolio selection model" does not apply to compound return data. We propose using notional portfolios and normalized linear returns to remedy this problem.

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    Paper provided by in its series Papers with number 1104.5393.

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    Date of creation: Apr 2011
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    Handle: RePEc:arx:papers:1104.5393
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