We had our first taste of the problem with mean-variance optimization at a hedge fund some years back. We loaded the positions into an optimizer, pressed the button, and discovered 25% of the ...

There’s a reason Wall Street firms recruit from MIT. For many investors, the financial markets are governed entirely by mathematical equations applied to aspects of a security’s price and trading ...

We were visiting a hedge fund some years back when we had our first taste of the problem with mean-variance optimization—the tool advisors use to balance risk and reward in client portfolios. We ...

We formulate a novel Markov regime-switching factor model to describe the cyclical nature of asset returns in modern financial markets. Maintaining a factor model structure allows us to easily derive ...

(a) in the limit of low uncertainty in estimated asset mean returns, the robust portfolio converges toward the mean-variance portfolio obtained with the same inputs, and (b) in the limit of high ...

The mean-variance optimization suggested by Henry Markowitz represents a path-breaking work, the beginning of the so-called Modern Portfolio Theory. This theory has been criticized by some researchers ...