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December 28th, 2012, 04:47 AM   #1
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Eigenvalues & Eigenvectors applied to Portfolio Optimization


I am busy working through a paper i came accross online on portfolio optimization. The paper may be accessed on the following link: I am struggling, in particular, with the equation 5-6 on page 4. I am not sure how the authors managed to derive the equation. Why are only the first and last eigenvalues used???

Any ideas would be great!!!!

Many thanks in advance.
gbaileyzn is offline  
January 5th, 2013, 11:49 AM   #2
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Re: Eigenvalues & Eigenvectors applied to Portfolio Optimiza

The paper specifically says that they are looking at the "worst case scenarios". And that basically means they are looking at the extremes- the smallest and largest eigenvalues.
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