However, the discrete-time model is more in line with actual investment of financial markets, and the realization of continuous time model usually requires discrete means, so this paper studies the minimum variance portfolio selection when there's the liquid asset in the discrete-time financial market.
Part of the structures of this paper is as follows: Section 2 gives the model design, constructing the minimum variance portfolio selection model; Section 3 uses Lagrange multipliers and dynamic programming principle to obtain the minimum variance and optimal investment strategy; Section 4 is to analyze the investment value; Section 5 gives the relevant numerical analysis; and Section 6 concludes the paper.
The efficient frontier consists of the envelope portfolios above the minimum variance portfolio.
Let us denote [epsilon] as the weight of the lending tangency portfolio and (1 - [epsilon]) as the weight of the borrowing tangency portfolio used to construct a third portfolio on the envelope of minimum variance portfolios for a given expected return.
The study found that minimum variance portfolio
showed best performance.
Yilmaz (2010) provides evidence for the improved covariance estimation using the DCC-GARCH model for a global minimum variance portfolio
by using data from the Istanbul Stock Exchange.
In addition to risk parity, risk-based strategies include minimum variance portfolio
theory and maximum diversification.
Next, a multi-objective optimization problem is formulated, where a minimum variance portfolio
achieves maximum effect of diversification.
The variance of a minimum variance portfolio
p can be obtained by analytically solving Markowitz's mean-variance model (8).
To compute the minimum variance portfolio
select the Portfolio worksheet and go to Tools>Solver.
The minimum variance portfolio
had an average rate of return of 13.
portfolio, which is the minimum variance portfolio