Portfolio Choice Problems An Introductory Survey of Single and Multi
This brief offers a broad, yet concise, coverage of portfolio choice, containing both application-oriented and academic results, along with abundant pointers to the literature for further study. It cuts through many strands of the subject, presenting not
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Nicolas Chapados
Portfolio Choice Problems An Introductory Survey of Single and Multiperiod Models
Nicolas Chapados Department of Computer Science and Operations Research University of Montreal PO Box 6128 Succ. Centre-Ville Montréal (Québec) H3C 3J7 Canada [email protected]
e-ISSN 2191-8120 ISSN 2191-8112 e-ISBN 978-1-4614-0577-1 ISBN 978-1-4614-0576-4 DOI 10.1007/978-1-4614-0577-1 Springer New York Dordrecht Heidelberg London Library of Congress Control Number: 2011932222 © The Author 2011 All rights reserved. This work may not be translated or copied in whole or in part without the written permission of the publisher (Springer Science+Business Media, LLC, 233 Spring Street, New York, NY 10013, USA), except for brief excerpts in connection with reviews or scholarly analysis. Use in connection with any form of information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed is forbidden. The use in this publication of trade names, trademarks, service marks, and similar terms, even if they are not identified as such, is not to be taken as an expression of opinion as to whether or not they are subject to proprietary rights. Printed on acid-free paper Springer is part of Springer Science+Business Media (www.springer.com)
Preface
This book grew out of an introduction to portfolio choice problems presented in Chapados (2010). This problem has a long history: Markowitz’s 1952 treatment of the subject now known as “Modern Portfolio Theory” is close to reaching the venerable age of sixty. In the intervening years, notions such as mean-variance efficiency have had enormous impact in the theory and practice of finance, not only on the “mundane” task of asset allocation but as models of the general trade-off between risk and return in financial markets, as well as portfolio performance measurement and attribution. For newcomers to the field, it has been increasingly difficult to obtain a broad yet concise coverage of the subject. On the one hand, the practitioner-oriented literature focuses, by and large, on single-period models and the techniques1 needed do fix the deficiencies in Markowitz’s simple quadratic programming formulation. On the other hand, more academic treatments address the elegant generalization to the multiperiod case, but have been far less accessible. Moreover, the substantial body of research outside the field of financial economics has largely been scattered, with no work attempting to bring a unified treatment to the topic. This book aims to fill this gap by offering a broad coverage of portfolio choice, containing both application-oriented and academic results, along with abundant pointers to the literature for further study. It tries to cut through many strands of the subject, presenting not only the classical results from financial economics but also approaches originating from information theory, machine learning and operations research. As
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