Mean—Variance Analysis

In a mean—variance portfolio analysis (Markowitz, 1959) an n-component vector (portfolio) X is called feasible if it satisfies where A is an m x n matrix of constraint coefficients, and b an m-component constant vector. An EV combination is called feasible if for some feasible portfolio. Here E is the expected return of the portfolio, V the variance of the portfolio, μ the vector of expected returns on securities, and C a positive semidefinite covariance matrix of returns among securities.

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