On the Markowitz Mean-Variance Analysis of Self-Financing Portfolios
21 Pages Posted: 19 Oct 2006 Last revised: 18 Aug 2016
Date Written: August 17, 2016
This paper extends the work of Korkie and Turtle (2002) by first proving that the traditional estimate for the optimal return of self-financing portfolios always over-estimates from its theoretic value. To circumvent the problem, we develop a Bootstrap estimate for the optimal return of self-financing portfolios and prove that this estimate is consistent with its counterpart parameter. We further demonstrate the superiority of our proposed estimate over the traditional estimate by simulation.
Keywords: Self-Financing Portfolios, Optimal Portfolio Allocation, Mean-Variance Optimization, Large Random Matrix, Bootstrap Method
JEL Classification: G11, C13
Suggested Citation: Suggested Citation