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It's 11 Pm—do You Know Where Your Liquidity Is? the Mean-variance-liquidity Frontier ∗
| Content Provider | Semantic Scholar |
|---|---|
| Author | Lo, Andrew W. Petrov, Constantin A. Wierzbicki, M. |
| Copyright Year | 2006 |
| Abstract | AbstractWe introduce liquidity into the standard mean–variance portfolio optimization framework by defining several measures of liquidity and then constructing three-dimensional mean–variance–liquidity frontiers in three ways: liquidity filtering, liquidity constraints, and a mean–variance–liquidity objective function. We show that portfolios close to each other on the traditional mean–variance efficient frontier can differ substantially in their liquidity characteristics. In a simple empirical example, the liquidity exposure of mean–variance efficient portfolios changes dramatically from month to month, and even simple forms of liquidity optimization can yield significant benefits in reducing a portfolio's liquidity-risk exposure without sacrificing a great deal of expected return per unit risk. |
| Starting Page | 47 |
| Ending Page | 92 |
| Page Count | 46 |
| File Format | PDF HTM / HTML |
| DOI | 10.1142/9789812700865_0003 |
| Alternate Webpage(s) | https://joim.com/wp-content/uploads/emember/downloads/p0006.pdf |
| Alternate Webpage(s) | http://alo.mit.edu/wp-content/uploads/2015/08/Its11pmLiquidity2003.pdf |
| Alternate Webpage(s) | http://web.mit.edu/~alo/www/Papers/JOIM2003_Final.pdf |
| Alternate Webpage(s) | https://doi.org/10.1142/9789812700865_0003 |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
