In this chapter we develop the GAMS models for mean-variance portfolio optimization. The development is based on the discussion of Chapter PFO-3. The following models are discussed in this chapter and the GAMS source code for each is given in the associated FINLIB files:

• MeanVar.gms

• Estimate.gms

• Sharpe.gms

• MeanVarShort.gms

• MeanVarMip.gms

• Borrow.gms

• InternationalMeanVar.gms

The classic mean-variance model addresses the question of trading off the portfolio expected return against its risk as measured by the variance of return. The model assumes normally distributed returns and multivariate normal correlation structures, but it is also applied in practice when the distributions are almost normal. For more details on the theoretical background of the model, ...

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