The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Mean-Variance Analysis

  • Harry M. Markowitz
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_1016

Abstract

Mean-variance analysis is concerned with combining risky assets in a way that minimizes the variance of risk at any desired mean return. In the use of mean-variance analysis for actual money management, the issue is how to estimate the large number of required covariances. Many-factor models of covariance are widely used, as are scenario and combined scenario and factor models, and constant correlation models. This simplifies the parameter estimation problem and can accelerate the computation of efficient sets for analyses containing hundreds of securities.

Keywords

Capital asset pricing models Constant correlation models Corner portfolio Covariance Dynamic programming Factor models Liquidity preference Markowitz, H. M. Mean-variance analysis Option Prices Quadratic Approximation Risk aversion Scenario models 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Harry M. Markowitz
    • 1
  1. 1.