Question

Harry Markowitz' 1952 dissertation, 'Portfolio Selection' revolutionized modern finance creating MPT (modern portfolio theory). As useful as Markowitz' paradigm of mean-variance optimization is, what are shortcomings of the methodology in practice?

		Mean-variance optimization assumes that prior returns of assets are indicative of their future returns.
		Mean-variance optimization assume that the prior correlations between assets will hold into the future (for example, that A and B's correlation estimated over the prior period will hold into the next period).
		Mean-variance optimization assumes that all asset returns all perfectly normally distributed- when in fact, they are not.
		All of the above

Answer 1

page or above. Answer What are short comings us the methodology in practise loption y is the correct answer All of the Explanation : Expected return based on historical data mean variance Optimization approach of portfolio selection : The model has many limitations, like use of historical data, linear (static) correlation and normality in return distribution graph given uses by Correet. arre so 1, 2, 3 statements