With the insight that traditional

mean-variance analysis measures of risk are not sufficient for diversification during, for example, market crashes, the Ziembas demonstrate how investors fail to diversify enough, describe the incentives in both directions, unpack rewards and dangers, and analyze results of a range of potential outcomes.

Thus, we use

mean-variance analysis to determine the optimal mix of stocks and bonds in a portfolio for a given holding period and compare the percentage of equities to that actually held in five popular target retirement funds: Fidelity, Principal, T.

According to EDHEC, this is a formidable challenge that severely exacerbates the dimensionality problem already present with

mean-variance analysis.

Ritchken, 1985, "Enhancing

Mean-Variance Analysis with Options", Journal of Portfolio Management, 11:67-71

In addition,

mean-variance analysis treats financial wealth in isolation from income.

Mean-Variance Analysis in Portfolio Choice and Capital Markets, New York: Basil Blackwell.

The results of

mean-variance analysis are often presented in the context of the efficient frontier, which shows expected portfolio return as a strict function of risk (Figure 1).

We find that, contrary to recent Government policy and the results from a simple

mean-variance analysis, the welfare-maximising policy requires that all public debt be denominated in foreign currency.

However, the usefulness of

mean-variance analysis as a computable approximation to full EU analysis was defended vigorously, especially by Tobin (1969) (see Borch (1969), Feldstein (1969) and Tobin (1969)).

Furlong, 1990, "A Reexamination of

Mean-Variance Analysis of Bank Capital Regulation", Journal of Banking and Finance, 14:69-84

Thanks to the property that a linear transformation of ellipticals of the same family is still elliptical of the same family, the

mean-variance analysis can be generalized to non-normal, fat-tailed portfolios.