Applying Markowitz’s Critical Line Algorithm

Niedermayer, Andras; Niedermayer, Daniel (January 2007). Applying Markowitz’s Critical Line Algorithm (Discussion Papers 07-01). Bern: Department of Economics

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We provide a Matlab quadratic optimization tool based on Markowitz’s critical line algorithm that significantly outperforms standard software packages and a recently developed operations research algorithm. As an illustration: For a 2000 asset universe our method needs less than a
second to compute the whole frontier whereas the quickest competitor needs several hours. This paper can be considered as a didactic alternative to the critical line algorithm such as presented by Markowitz and treats all steps required by the algorithm explicitly. Finally, we present a benchmark of different optimization algorithms’ performance.

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