3,928
Views
4
CrossRef citations to date
0
Altmetric
Articles

Improving the volatility of the optimal weights of the Markowitz model

, &
Pages 2836-2858 | Received 03 Jun 2021, Accepted 09 Sep 2021, Published online: 29 Sep 2021

References

  • Bai, Z., Liu, H., & Wong, W.-K. (2009). Enhancement of the applicability of Markowitz’s portfolio optimization by utilizing random matrix theory. Mathematical Finance, 19(4), 639–667. https://doi.org/10.1111/j.1467-9965.2009.00383.x
  • Barry, C. B. (1974). Portfolio analysis under uncertain means, variances, and covariances. The Journal of Finance, 29(2), 515–522. https://doi.org/10.1111/j.1540-6261.1974.tb03064.x
  • Benartzi, S., & Thaler, R. H. (2001). Naive diversification strategies in defined contribution saving plans. American Economic Review, 91(1), 79–98. https://doi.org/10.1257/aer.91.1.79
  • Best, M. J., & Grauer, R. R. (1991). On the sensitivity of mean-variance-efficient portfolios to changes in asset means: some analytical and computational results. Review of Financial Studies, 4(2), 315–342. https://doi.org/10.1093/rfs/4.2.315
  • Best, M. J., & Grauer, R. R. (1992). Positively weighted minimum-variance portfolios and the structure of asset expected returns. The Journal of Financial and Quantitative Analysis, 27(4), 513–537. https://doi.org/10.2307/2331138
  • Black, F., & Litterman, R. (1992). Global portfolio optimization. Financial Analysts Journal, 48(5), 28–43. https://doi.org/10.2469/faj.v48.n5.28
  • Black, F., & Litterman, R. B. (1991). Asset allocation: combining investor views with market equilibrium. The Journal of Fixed Income, 1(2), 7–18. https://doi.org/10.3905/jfi.1991.408013
  • Bloomfield, T., Leftwich, R., & Long, J. B. (1977). Portfolio strategies and performance. Journal of Financial Economics, 5(2), 201–218. https://doi.org/10.1016/0304-405X(77)90018-6
  • Brown, S. (1979). The effect of estimation risk on capital market equilibrium. The Journal of Financial and Quantitative Analysis, 14(2), 215–220. https://doi.org/10.2307/2330499
  • Chopra, V. K. (1993). Improving optimization. The Journal of Investing, 2(3), 51–59. https://doi.org/10.3905/joi.2.3.51
  • Chopra, V. K., & Ziemba, W. T. (2013). The effect of errors in means, variances, and covariances on optimal portfolio choice. In Handbook of the fundamentals of financial decision making: Part I (pp. 365–373).
  • DeMiguel, V., Garlappi, L., & Uppal, R. (2009). Optimal versus naive diversification: How inefficient is the 1/n portfolio strategy? Review of Financial Studies, 22(5), 1915–1953. https://doi.org/10.1093/rfs/hhm075
  • DeMiguel, V., Martin-Utrera, A., & Nogales, F. J. (2013). Size matters: Optimal calibration of shrinkage estimators for portfolio selection. Journal of Banking & Finance, 37(8), 3018–3034. https://doi.org/10.1016/j.jbankfin.2013.04.033
  • Fahmy, H. (2020). Mean-variance-time: An extension of markowitz’s mean-variance portfolio theory. Journal of Economics and Business, 109, 105888. https://doi.org/10.1016/j.jeconbus.2019.105888
  • Frost, P. A., & Savarino, J. E. (1986). An empirical bayes approach to efficient portfolio selection. The Journal of Financial and Quantitative Analysis, 21(3), 293–305. https://doi.org/10.2307/2331043
  • Garlappi, L., Uppal, R., & Wang, T. (2007). Portfolio selection with parameter and model uncertainty: A multi-prior approach. Review of Financial Studies, 20(1), 41–81. https://doi.org/10.1093/rfs/hhl003
  • Georgalos, K., Paya, I., & Peel, D. A. (2021). On the contribution of the Markowitz model of utility to explain risky choice in experimental research. Journal of Economic Behavior & Organization, 182, 527–543. https://doi.org/10.1016/j.jebo.2018.11.010
  • Jobson, J. D., & Korkie, R. M. (1981). Putting Markowitz theory to work. The Journal of Portfolio Management, 7(4), 70–74. https://doi.org/10.3905/jpm.1981.408816
  • Jorion, P. (1986). Bayes-stein estimation for portfolio analysis. The Journal of Financial and Quantitative Analysis, 21(3), 279–292. https://doi.org/10.2307/2331042
  • Kan, R., & Zhou, G. (2007). Optimal portfolio choice with parameter uncertainty. Journal of Financial and Quantitative Analysis, 42(3), 621–656. https://doi.org/10.1017/S0022109000004129
  • Klein, R. W., & Bawa, V. S. (1976). The effect of estimation risk on optimal portfolio choice. Journal of Financial Economics, 3(3), 215–231. https://doi.org/10.1016/0304-405X(76)90004-0
  • Kritzman, M., Page, S., & Turkington, D. (2010). In defense of optimization: the fallacy of 1/n. Financial Analysts Journal, 66(2), 31–39. https://doi.org/10.2469/faj.v66.n2.6
  • Laloux, L., Cizeau, P., Bouchaud, J.-P., & Potters, M. (1999). Noise dressing of financial correlation matrices. Physical Review Letters, 83(7), 1467–1470. https://doi.org/10.1103/PhysRevLett.83.1467
  • Ledoit, O., & Wolf, M. (2003). Improved estimation of the covariance matrix of stock returns with an application to portfolio selection. Journal of Empirical Finance, 10(5), 603–621. https://doi.org/10.1016/S0927-5398(03)00007-0
  • Ledoit, O., & Wolf, M. (2004a). Honey, i shrunk the sample covariance matrix. The Journal of Portfolio Management, 30(4), 110–119. https://doi.org/10.3905/jpm.2004.110
  • Ledoit, O., & Wolf, M. (2004b). A well-conditioned estimator for large-dimensional covariance matrices. Journal of Multivariate Analysis, 88(2), 365–411. https://doi.org/10.1016/S0047-259X(03)00096-4
  • Ledoit, O., & Wolf, M. (2020). The power of (non-) linear shrinking: A review and guide to covariance matrix estimation. Journal of Financial Econometrics, https://doi.org/10.1093/jjfinec/nbaa007
  • Ledoit, O., & Wolf, M. (2019). Quadratic shrinkage for large covariance matrices. University of Zurich, Departmenf of Economics, Working Paper No. 323, Revised version.
  • MacKinlay, A. C., & Pástor, L. (2000). Asset pricing models: Implications for expected returns and portfolio selection. Review of Financial Studies, 13(4), 883–916. https://doi.org/10.1093/rfs/13.4.883
  • Marchenko, V. A., & Pastur, L. A. (1967). Distribution of eigenvalues for some sets of random matrices. Matematicheskii Sbornik, 114(4), 507–536.
  • Markowitz, H. (1952). Portfolio selection. The Journal of Finance, 7(1), 77–91.
  • Markowitz, H. (1959). Portfolio Selection, Efficient Diversification of Investments. J. Wiley.
  • Merton, R. C. (1980). On estimating the expected return on the market: An exploratory investigation. Journal of Financial Economics, 8(4), 323–361. https://doi.org/10.1016/0304-405X(80)90007-0
  • Michaud, R. O. (1989). The Markowitz optimization enigma: Is optimized optimal? ICFA Continuing Education Series, 1989(4), 43–54. https://doi.org/10.2469/cp.v1989.n4.6
  • Ng, C. T., Shi, Y., & Chan, N. H. (2020). Markowitz portfolio and the blur of history. International Journal of Theoretical and Applied Finance, 23(05), 2050030. https://doi.org/10.1142/S0219024920500302
  • Ollila, E., & Raninen, E. (2019). Optimal shrinkage covariance matrix estimation under random sampling from elliptical distributions. IEEE Transactions on Signal Processing, 67(10), 2707–2719. https://doi.org/10.1109/TSP.2019.2908144
  • Papp, G., Pafka, S., Nowak, M. A., & Kondor, I. (2005). Random matrix filtering in portfolio optimization. Acta Physica Polonica. Series B, 35(9), 2757–2765.
  • Schäfer, J., & Strimmer, K. (2005). A shrinkage approach to large-scale covariance matrix estimation and implications for functional genomics. Statistical Applications in Genetics and Molecular Biology, 4(1), 32. https://doi.org/10.2202/1544-6115.1175
  • Sortino, F. A., & Van Der Meer, R. (1991). Downside risk. The Journal of Portfolio Management, 17(4), 27–31. https://doi.org/10.3905/jpm.1991.409343
  • Tobin, J. (1958). Liquidity preference as behavior towards risk. The Review of Economic Studies, 25(2), 65–86. https://doi.org/10.2307/2296205