On the equivalence of quadratic optimization problems commonly used in portfolio theory
We consider three quadratic optimization problems applied in portfolio theory. Conditions are derived under which the solutions of these three optimization procedures are lying on the efficient frontier. We show that the three quadratic optimization problems are mathematically equivalent but not from a stochastic point of view. We derive the probabilities that the estimated solutions of the Markowitz problem and the quadratic utility problem are meanvariance efficient.
investment analysis meanvariance analysis parameter uncertainty interval estimation test theory