I?m looking for an authoritative definition of the term ?Global
Minimum Variance Portfolio? from Modern Portfolio Theory. It may have
been coined by Harry Markowitz, but I don?t know for sure.
The definition must be for the exact phrase ?Global Minimum Variance
Portfolio? and must be from an authoritative source such as a business
dictionary, text book, or the paper where the concept was originally
explained. |
Request for Question Clarification by
pafalafa-ga
on
16 May 2006 15:07 PDT
Earnest,
Are you looking for a mathematical definition like the one at this link:
http://esnips.com/web/GoogleAnswers
Click on the file named: global min var portfolio.jpg
Let me know how that looks.
pafalafa-ga
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Clarification of Question by
earnest_pontifex-ga
on
16 May 2006 15:51 PDT
Hi pafalafa,
Yes, it is a mathematical definition that I?m looking for. Not
necessarily the formula. Rather, the translation of the formula into
English.
That link says that it is the ?portfolio of assets with minimum
absolute variance.? That might be all I need, but what I?m after is
whether there are any restrictions on what assets may be used when
constructing this portfolio. Specifically, may all available assets
be used, or do they explicitly have to be so-called risky assets?
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Request for Question Clarification by
pafalafa-ga
on
16 May 2006 16:48 PDT
I've seen the term applied to portfolios containing stocks, real
estate and government bonds, so there don't seem to be any particular
constraints on the portfolio composition.
However, I haven't found a clear-cut statement of what such a
portfolio actually is (or isn't).
I'll keep looking, and let you know if anything turns up.
pafalafa-ga
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Clarification of Question by
earnest_pontifex-ga
on
17 May 2006 04:49 PDT
The earlist the term may have been used was in Markowitz's paper
"Portfolio Selection" published in 1952 in the Journal of Finance. If
he used it there, you could scan a few pages from the article so I can
see how he used it in context. I'd consider that a satisfactory
answer.
I increased the bounty for this question (and put on a tighter
deadline). Thanks for your help with this.
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Clarification of Question by
earnest_pontifex-ga
on
17 May 2006 05:11 PDT
I'll relax this a little more. Was the term ever used before James
Tobin wrote his paper, "Liquidity preference as behavior towards risk"
in The Review of Economic Studies in 1958? I beleive that is when an
explicit distinction was made between the so-called risky portfolio
and the risk-free asset. If the term "global minimum-variance
portfolio" pre-dates that distinction, that implies the answer.
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