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| Author: | Korkie, B. Turtle, H. J. |
| Title: | A Mean-Variance Analysis of Self-Financing Portfolios |
| Journal: | Management Science
2002 : MAR, VOL. 48:3, p. 427-443 |
| Index terms: | INVESTMENT PORTFOLIO MANAGEMENT ANALYTICAL REVIEW |
| Language: | eng |
| Abstract: | This paper develops the analytics and geometry of the investment opportunity set (IOS) and the test statistics for self-financing portfolios. A self-financing portfolio is a set of long and short investments such that the sum of their investment weights, or net investment, is zero. This contrasts with a standard portfolio that has investment weights summing to one. Examples of self-financing portfolios are hedges, overlays, arbitrage portfolios, swaps, and long/short portfolios. A standard portfolio plus the IOS of self-financing portfolios form a restricted IOS hyperbola with restricted efficient set constants that differ from the usual constants. The restrictions affect statistical tests of portfolio efficiency, which are developed for the self-financing restrictions. |
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