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Nazem Khan: Mean-Risk Portfolio Selection
Mean-variance portfolio selection by Markowitz is one of the cornerstones of modern finance. It is very intuitive, mathematically elegant and leads to nice explicit formulas. However, it has one major theoretical drawback: the risk of a portfolio is measured in terms of its variance, which for various reasons is not a good choice for returns that are not normally distributed (as is the case in reality). In this session we will explore the consequences of replacing the variance by other measures of risk.