The Opportunity Cost of a Mean‐Variance Efficient Choice
作者:
Bernard V. Tew,
Donald W. Reid,
Craig A. Witt,
期刊:
Financial Review
(WILEY Available online 1991)
卷期:
Volume 26,
issue 1
页码: 31-43
ISSN:0732-8516
年代: 1991
DOI:10.1111/j.1540-6288.1991.tb00368.x
出版商: Blackwell Publishing Ltd
数据来源: WILEY
摘要:
AbstractThe mean‐variance criterion is one of the most frequently used methods for selecting investment portfolios. Yet, because it is an approximation of an investor's maximum expected utility choice, some theoreticians and practitioners have criticized the approach. This paper examines the investment loss that different investors experience by accepting a mean‐variance efficient portfolio. Simulated security returns with extreme distributional characteristics are used to determine the extent of an investor's loss. The results indicate that even under very unreasonable investment distributional assumptions, an investor's loss by accepting a mean‐variance efficient choice rarely exceeds a small fraction of one percent per invested d
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