Covariance appears throughout investment management, e.g., in risk reporting and control, portfolio construction, risk … parameters’ mean and covariance to their effect at the investment portfolio level. Forecasted portfolio variance changes from a … risk assessment, uncertainty-penalized optimization to counter estimation error and improve realized utility, and …

Mean-variance optimization provides a framework for constructing portfolios that have minimum risk for a given level of … constraints. While portfolio optimization always leads to an increase in ex ante risk-adjusted performance, there is no guarantee … matrix when using mean-variance optimization for portfolio construction. In particular, we show that sampling error leads to …