An Introduction to Optimal Portfolio Models from Markowitz to Robust Estimation:
Lesson 1: The Roots of Optimal Portfolio Models.
The Markowitz Optimal Portfolio Problem. Mathematical properties, parameters estimation, experimental results.
The Von Neumann-Morgenstern Utility Theory. Risk adverse and risk taker investor’s behavior. Optimal portfolios of utility maximizer investors.
Lesson 2: Portfolio models with non-invertible covariance matrices.
The difficulty of estimating the covariance matrix and three solutions: The Mean/Absolute-Deviation portfolio model, the Markowitz model with cardinality constraints, Shrinkage estimators of the Covariance matrix.
Lesson 3: Portfolio models with robust estimators.
Variance estimators that are robust. The Optimal Median portfolio model. The Median/Risk portfolio models, integer linear programming formulation, experimental results.
