It’s 11PM – Do You Know Where Your Liquidity Is? The Mean-Variance Liquidity Frontier
Andrew W. Lo, Constantin Petrov, and Martin Wierzbicki We introduce liquidity into a 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
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