PT  - JOURNAL ARTICLE
AU  - Zhongjin Yang
AU  - Keli Han
AU  - Marat Molyboga
AU  - Georgiy Molyboga
TI  - A New Diagnostic Approach to Evaluating the Stability of Optimal Portfolios
AID  - 10.3905/joi.2016.25.1.037
DP  - 2016 Feb 29
TA  - The Journal of Investing
PG  - 37--45
VI  - 25
IP  - 1
4099  - https://pm-research.com/content/25/1/37.short
4100  - https://pm-research.com/content/25/1/37.full
AB  - We introduce a new quantitative approach that can be used as a diagnostic tool for measuring the stability of optimal portfolio weights for a very general set of mean-variance optimization methods. We present a derivation of the approach within a numerical analysis framework and demonstrate this method’s benefits using a few common examples of shrinkage estimators of the correlation matrix and volatility vector. Our technique has practical importance in evaluating the improvements in stability gained by employing various statistical estimators of covariance matrixes without having to perform complex calculations or use numerical simulations.TOPICS: Statistical methods, portfolio construction