Qi, Yue and Steuer, Ralph E. and Wimmer, Maximilian (2017) An analytical derivation of the efficient surface in portfolio selection with three criteria. ANNALS OF OPERATIONS RESEARCH, 251 (1-2). pp. 161-177. ISSN 0254-5330, 1572-9338
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In standard mean-variance bi-criterion portfolio selection, the efficient set is a frontier. While it is not yet standard for there to be additional criteria in portfolio selection, there has been a growing amount of discussion in the literature on the topic. However, should there be even one additional criterion, the efficient frontier becomes an efficient surface. Striving to parallel Merton's seminal analytical derivation of the efficient frontier, in this paper we provide an analytical derivation of the efficient surface when an additional linear criterion (on top of expected return and variance) is included in the model addressed by Merton. Among the results of the paper there is, as a higher dimensional counterpart to the 2-mutual-fund theorem of traditional portfolio selection, a 3-mutual-fund theorem in tricriterion portfolio selection. 3D graphs are employed to stress the paraboloidic/ hyperboloidic structures present in tri-criterion portfolio selection.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | MUTUAL FUNDS; OPTIMIZATION; MANAGEMENT; OBJECTIVES; FRONTIER; MODEL; Multiple criteria optimization; Tri-criterion portfolio selection; Minimumvariance frontier; e-Constraint method; Efficient surface; Paraboloids |
| Subjects: | 300 Social sciences > 330 Economics |
| Divisions: | Business, Economics and Information Systems > Institut für Betriebswirtschaftslehre |
| Depositing User: | Dr. Gernot Deinzer |
| Date Deposited: | 14 Dec 2018 13:11 |
| Last Modified: | 18 Feb 2019 14:24 |
| URI: | https://pred.uni-regensburg.de/id/eprint/1108 |
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