Journal of Mathematical Sciences: Advances and ApplicationsAuthor's: Chun-Fu Jiang and Hong-Yi Peng
Pages: [53] - [74]
Received Date: August 4, 2011
Submitted by:
The purpose of this paper is to discuss the problem how to check redundant assets for a mean-variance optimizing investor when the covariance matrix is the case of degeneracy. We propose a new concept of efficient subset of portfolio. We obtain some sufficient and necessary conditions for determining efficient subset. These conditions can be employed to decide whether new assets should be added to original portfolios. Moreover, the equivalent conditions analogous with k-funds separation theorem are derived. The extensions of these results to mean-variance spanning with singular covariance matrix are also considered.
portfolio, efficient subset, singular covariance matrix, mean-variance spanning.
