Acta mathematica scientia, Series B >
MARKOWITZ STRATEGIES REVISED
Received date: 2008-12-30
Online published: 2009-07-20
Supported by
The work of Yan was supported by the National Natural Science Foundation of China (10571167), the National Basic Research Program of China (973 Program, 2007CB814902), and the Science Fund for Creative Research Groups (10721101); The work of Zhou was supported by the Nomura Centre for Mathematical Finance and the Oxford–Man Institute of Quantitative Finance, as well as a start-up fund of the University of Oxford.
Continuous-time Markowitz’s mean-variance efficient strategies are modified by parameterizing a critical quantity. It is shown that these parameterized Markowitz strategies could reach the original mean target with arbitrarily high probabilities. This, in turn, motivates the introduction of certain stopped strategies where stock holdings are
liquidated whenever the parameterized Markowitz strategies reach the present value of the mean target. The risk aspect of the revised Markowitz strategies are examined via expected discounted loss from the initial budget. A new portfolio selection model is suggested based on the results of the paper.
YAN Jia-An , ZHOU Xun-Yu . MARKOWITZ STRATEGIES REVISED[J]. Acta mathematica scientia, Series B, 2009 , 29(4) : 817 -828 . DOI: 10.1016/S0252-9602(09)60072-2
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