In his 1984 paper in Management Science, McEntire conjectured that all concave utility functions satisfy his independence-from-irrelevant-assets (IIA) property. This paper shows that this conjecture is false. The paper provides several families of utility functions, all of whose members violate...

Forecasting the mean returns vector and the covariance matrix is a key feature in implementing portfolio theory. The performance of the Bayes-Stein method for forecasting these parameters for use in the Markowitz model (with and without short sales) was compared with that of seven other...

This study uses factor analysis to simplify the complex relationships among stock markets and to reduce the number of markets required for portfolio construction. Our sample consists of the US and 11 Asia-Pacific stock markets. We find that the reduced portfolio obtained from factor analysis has...

W artykule przeanalizowano rozwiazanie problemu optymalnej selekcji portfela papierow wartosciowych, przedstawiajac go jako zagadnienie nieliniowego, rozmytego, dwukryterialnego programowania. W tym celu opracowano specjalny algorytm numeryczny. Pokazano, ze tak sformulowany problem dostarcza...

In this paper we consider the sensitivity problem connected with portfolio optimization results when different measures of risk such as portfolio rates of return standard deviation, portfolio VaR, CVaR are minimized. Conditioning the data (represented by spectral condition index of the rates of...

A new algorithm for selecting an effective investment project portfolio from a collection of projects developed by a company has been presented in this paper. The problem of selecting an investment project was formulated as multi-objective optimization problem. The algorithm is suited for...

In the classic Markowitz model, risk is measured by the return rates variance. However, equal treatment of negative and positive deviations from the expected return rate is a slight shortcoming of variance as the risk measure. Markowitz defined semi-variance to measure the negative deviations...

Value-at-Risk (VaR) has become one of the standard measures for assessing risk not only in the financial industry but also for asset allocations of individual investors. The traditional mean-variance framework for portfolio selection should, however, be revised when the investor's concern is the...