Mean-variance Vs. full-scale optimization: broad evidence for the UK

Björn Hagströmer, Richard Anderson, Jane Binner, Thomas Elger, Nilsson Birger

Research output: Preprint or Working paperWorking paper

Abstract

This article investigates the performance of a model called Full-Scale Optimisation, which was presented recently and is used for financial investment advice. The investor’s preferences of expected risk and return are entered into the model, and a recommended portfolio is produced. This model is theoretically more accurate than the mainstream investment advice model, called Mean-Variance Optimization, as there are fewer assumptions made. Our investigation of the model’s performance is broader when it comes to investor preferences, and more general when it comes to investment type, as compared to previous studies. Our investigation shows that Full-Scale Optimisation is more widely applicable than earlier known.
Original languageEnglish
Place of PublicationBirmingham
PublisherAston University
ISBN (Print)9781854497017
Publication statusPublished - Mar 2007

Bibliographical note

RP0711

Keywords

  • portfolio choice
  • utility maximisation
  • full-scale optimisation
  • S-shaped utility
  • bilinear utility

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    Hagströmer, B., Anderson, R., Binner, J., Elger, T., & Birger, N. (2007). Mean-variance Vs. full-scale optimization: broad evidence for the UK. Aston University.