SC 99-30 Marc C. Steinbach: Markowitz Revisited: Single-Period and Multi-Period
Mean-Variance Models
Abstract: Mean-variance portfolio analysis provided the first
quantitative treatment
of the tradeoff between profit and risk.
We investigate in detail the interplay between objective
and constraints
in a number of single-period variants, including
semi-variance models.
Particular emphasis is laid on avoiding the penalization
of overperformance.
The results are then used as building blocks in the
development and
theoretical analysis of multi-period models based on
scenario trees.
A key property is the possibility to remove surplus money
in future
decisions, yielding approximate downside risk
minimization.
Keywords: mean-variance analysis,
downside risk,
multi-period model
MSC: 90A09, 90C15, 90C20