Abstract

http://ssrn.com/abstract=2131932
 
 

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Mean-Variance Investing


Andrew Ang


Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

August 10, 2012

Columbia Business School Research Paper No. 12/49

Abstract:     
Mean-variance investing is all about diversification. Diversification considers assets holistically and exploits the interaction of assets with each other, rather than viewing assets in isolation. Holding a diversified portfolio allows investors to increase expected returns while reducing risks. In practice, mean-variance portfolios that constrain the mean, volatility, and correlation inputs to reduce sampling error have performed much better than unconstrained portfolios. These special cases include equal-weighted, minimum variance, and risk parity portfolios.

Number of Pages in PDF File: 62

Keywords: Diversification, efficient frontier, free lunch, non-participation, risk parity, volatility weighting, estimation risk

JEL Classification: G11, G12

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Date posted: August 19, 2012  

Suggested Citation

Ang, Andrew, Mean-Variance Investing (August 10, 2012). Columbia Business School Research Paper No. 12/49. Available at SSRN: http://ssrn.com/abstract=2131932 or http://dx.doi.org/10.2139/ssrn.2131932

Contact Information

Andrew Ang (Contact Author)
Columbia Business School - Finance and Economics ( email )
3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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