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Portfolio Management

S/F/37. Mean-Variance analysis in international context

WORDS:

1000

DATE:

2005

PRICE:

19.99 GBP

This paper is dedicated to the application of the Markovitz's mean-variance optimization to the portfolio consisting of the eight international stock indices. At the beginning of the analysis the author thoroughly highlights all disadvantages of the mean-variance analysis from theoretical and practical points of view. Then the paper continues with practical building of the efficiency frontiers and finding optimal portfolio. All spreadsheets are presented in the text. This work provides comprehensive scrutiny of why efficiency frontier presents the most optimal combination for investors. At the end the author highlights intuition behind the Litterman-Black model, one of the most powerful models in the investment management, which combines mathematical precision and psychological attitudes of investors. The paper will be indispensable for those building efficiency frontiers and trying to critically evaluate mean-variance approach to investing.

KEYWORDS: f, mean-variance, international, context,