In modern portfolio theory, it is common practice to first compute the risk-reward efficient frontier and then to support an individual investor in selecting a portfolio that meets his/her preferences for profitability and risk. Potential flaws include (a) the assumption that past data provide...

This paper is dedicated to the conceptual and methodologic development of the optimization for asset portofolio and we attack the problem in three stages: selecting assets, risk estimation, solving the optimization problem. We select assets in the portfolio using principal components analysis in...