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6 Criticisms of Mean-Variance Optimization

December 30, 2017
  1. The asset allocations are highly sensitive to small changes in the inputs.
  2. Asset allocations tend to be highly concentrated.
  3. Investors are concerned with more than mean and variance of returns.
  4. The sources of risk may not be diversified.
  5. Disconnect between MVO and the influences on the value of the liability or consumption series it is intended to pay for.
  6. Single-period framework, no trading costs or taxes considered.
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