The Markowitz category

DOI10.1137/17M1155727MaRDI QIDQ4553798zbMATH OpenFDO

Authors John Armstrong

Publication date 31 October 2018

Published in SIAM Journal on Financial Mathematics (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1611.07741

zbMATH Keywords

categoryisomorphismMarkowitzportfolio optimization

Mathematics Subject Classification ID

Portfolio theory (91G10)

Abstract: We give an algebraic definition of a Markowitz market and classify markets up to isomorphism. Given this classification, the theory of portfolio optimization in Markowitz markets without short selling constraints becomes trivial. Conversely, this classification shows that, up to isomorphism, there is little that can be said about a Markowitz market that is not already detected by the theory of portfolio optimization. In particular, if one seeks to develop a simplified low-dimensional model of a large financial market using mean--variance analysis alone, the resulting model can be at most two-dimensional.

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Cites work

• General Theory of Natural Equivalences
• Information geometry and sufficient statistics

Cited in

(3)

• A geometric point of view on mean-variance models
• Classifying financial markets up to isomorphism
• Itô stochastic differentials

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