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Computation of mean-semivariance efficient sets by the Critical Line Algorithm

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Abstract

The general mean-semivariance portfolio optimization problem seeks to determine the efficient frontier by solving a parametric non-quadratic programming problem. In this paper it is shown how to transform this problem into a general mean-variance optimization problem, hence the Critical Line Algorithm is applicable. This paper also discusses how to implement the critical line algorithm to save storage and reduce execution time.

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References

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  5. H.M. Markowitz, P. Todd, G.L. Xu and Y. Yamane, Fast computation of mean-variance efficient sets using historical covariance, J. Fin. Eng. (1991), to appear.

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Markowitz, H., Todd, P., Xu, G. et al. Computation of mean-semivariance efficient sets by the Critical Line Algorithm. Ann Oper Res 45, 307–317 (1993). https://doi.org/10.1007/BF02282055

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  • DOI: https://doi.org/10.1007/BF02282055

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