We use insight from a model of earth techtonic plate movement to obtain a new understanding of the build up and release of stress in the price dynamics of the world's stock exchanges. Nonlinearity enters the model due to a behavioral attribute of humans reacting disproportionately to big...

We are pleased that Becker, Gürtler and Hibbeln (BGH), authors of “Markowitz versus Michaud: Portfolio Optimization Strategies Reconsidered,” are interested in assessing the investment value of Michaud optimization (Michaud 1990, Michaud and Michaud 2008), relative to Markowitz (1952,...

Target date funds are popular among many employers and fund managers. They are marketed as age-appropriate diversified portfolios and promoted as sophisticated easy-to-use funds.However, TDFs are no panacea. They are controversial among financial economists, insufficiently regulated, and...

The mean-variance (MV) optimization of Markowitz (1959) has been the standard for efficient asset allocation for almost 50 years. Nearly all commercial asset allocation optimizers are based on some variation of the Markowitz method. Markowitz MV optimized portfolios potentially have many...

The Markowitz (1952, 1959) mean-variance (MV) efficient frontier has been the theoretical standard for defining portfolio optimality for more than a half century. However, MV optimized portfolios are highly susceptible to estimation error and difficult to manage in practice (Jobson and Korkie...

The when-to-trade decision is a critical yet neglected component of modern asset management. Typical rebalancing rules are based on suboptimal heuristics. Rebalancing is necessarily a statistical similarity test between current and proposed optimal portfolios. Available tests ignore many real...

Allen et al (ALS) (2019) claim that a CAPM based theoretical framework for Markowitz (1952) mean-variance (MV) efficiency and a small level of forecast information (IC) can beat equal weighted portfolios. A portfolio optimization procedure worse than equal weighting would have little practical...

According to widely referenced applications of the Grinold (1989) “Fundamental Law” theory, simply adding more securities to an optimization universe, adding more factors to a forecast return model, trading more frequently, or reducing more constraints can add investment value to an...

In our “Comment” Michaud, Esch, Michaud (2015), on Becker, Gurtler, and Hibbeln (2015) (BGH) we noted a number of critical limitations of their study of Markowitz (1952) versus Michaud (1998) MV optimization. In particular, in a paper primarily focused on disparaging Michaud optimization,...

Markowitz (1959) mean-variance (MV) portfolio optimization has been the practical standard for asset allocation and equity portfolio management for almost fifty years. However, it is known to be overly sensitive to estimation error in risk-return estimates and have poor out-of-sample performance...