On a generalization of Markowitz preference relation

MaRDI QIDQ5155421zbMATH OpenFDO

Authors Valentin Vankov Iliev

Publication date 6 October 2021

Full work available at URL https://arxiv.org/abs/1512.08098

zbMATH Keywords

efficient financial portfolioMarkowitz preference relationmean-variance theorytopological space

Mathematics Subject Classification ID

Convergence in general topology (sequences, filters, limits, convergence spaces, nets, etc.) (54A20) Portfolio theory (91G10) Financial applications of other theories (91G80)

Abstract: Given two families of continuous functions $u$ and $v$ on a topological space $X$, we define a preorder $R=R(u,v)$ on $X$ by the condition that any member of $u$ is an $R$-increasing and any member of $v$ is an $R$-decreasing function. It turns out that if the topological space $X$ is quasi-compact and sequentially compact, then any element of $X$ is $R$-dominated by an $R$-maximal element of $X$. In particular, since the $(n-1)$-dimensional simplex is a compact subset of the real $n$-dimensional vector space, then considering its members as portfolios consisting of $n$ financial assets, we obtain the classical 1952 result of Harry Markowitz that any portfolio is dominated by an efficient portfolio. Moreover, several other examples of possible application of this general setup are presented.

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Cited in

(2)

• Efficient sets with and without the expected utility hypothesis. A generalization
• On the indifference relation in Bewley preferences

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