Robustness
Based on the problems of the Markowitz portfolios (see chapter 2.1.4), different solutions to improve the estimation errors or to generate ’robust portfolios’ are proposed in the literature. At first, this chapter gives a definition of robustness. Afterwa
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Albina Unger
The Use of Risk Budgets in Portfolio Optimization With a foreword by Prof. Dr. Thorsten Poddig
Albina Unger Friedrichsdorf, Germany
Dissertation University of Bremen, Germany, 2014
ISBN 978-3-658-07258-2 DOI 10.1007/978-3-658-07259-9
ISBN 978-3-658-07259-9 (eBook)
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Foreword Today’s active asset management is mainly based on the theory of portfolio selection, which was founded by H. Markowitz and J. Tobin in the 1950s. Since then, it was continuously developed. However, there arose quickly several points of criticism in practical applications. Practitioners complained about the results of the portfolio optimizations as unintuitive, since the resulting portfolio structures are usually characterized by high concentrations in a few assets. In addition, portfolio structures are very sensitive to minor changes in the input parameters, which are necessary for the portfolio optimization
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