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Portfolio optimization reconsidered: a generalisation


  • A. Schianchi



A general model of one-period portfolio optimization is presented in a new setting: financial leverage (i.e. margin accounts), long-buying/short-selling and a large number of assets are introduced. A multiple equilibrium solution is found, utilizing TAP equations (based on random matrices), a tool from physical spin glass analysis. This solution, however, is difficult to integrate into a strategic asset-allocation framework. In order to bypass these hurdles, an alternative deterministic approach - based on oscillatory behavioral expectations à la Krugman - is proposed in a Montecarlo context.

Suggested Citation

  • A. Schianchi, 2000. "Portfolio optimization reconsidered: a generalisation," Economics Department Working Papers 2000-EP04, Department of Economics, Parma University (Italy).
  • Handle: RePEc:par:dipeco:2000-ep04

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    References listed on IDEAS

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