Actively Managed Mean-Variance Portfolios

Forthcoming, Journal of Wealth Management

13 Pages Posted: 25 Feb 2020

See all articles by Paskalis Glabadanidis

Paskalis Glabadanidis

University of Adelaide Business School; Financial Research Network (FIRN)

Date Written: October 12, 2019


I present closed-form analytical solutions to the active mean-variance portfolio management problem relative to a pre-specified benchmark subject to a budget constraint and a beta constraint. The imposition of the beta constraint makes the benchmark relevant to the portfolio problem. I provide an intuitive interpretation of the optimal active portfolio in the general mean-variance case as well as a detailed expression for the optimal weights when returns follow a single-factor model. I show that the value-added of active portfolio management is simply the incremental certainty equivalent return of the active portfolio relative to the certainty equivalent return of the benchmark. I investigate the out-of-sample performance of the optimal active mean-variance portfolio using industry portfolios as well as individual stocks.

Keywords: active portfolio management, benchmark, mean-variance portfolio, tracking error, replicating portfolio

JEL Classification: G11, G10

Suggested Citation

Glabadanidis, Paskalis, Actively Managed Mean-Variance Portfolios (October 12, 2019). Forthcoming, Journal of Wealth Management, Available at SSRN:

Paskalis Glabadanidis (Contact Author)

University of Adelaide Business School ( email )

10 Pulteney Street
Adelaide, South Australia 5005

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
PlumX Metrics