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.
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Markowitz, H.M. (2018). Mean-Variance Analysis. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_1016
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DOI: https://doi.org/10.1057/978-1-349-95189-5_1016
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