Multi-horizon Markowitz portfolio performance appraisals: A general approach

This article extends the analysis of multi-horizon mean-variance portfolio analysis in the Morey and Morey Mutual fund performance appraisals: a multi-horizon perspective with endogenous benchmarking. Omega 1999;27:241–58] article in several ways. First, instead of either proportionally contracting risk dimensions or proportionally expanding return dimensions, a more general efficiency measure simultaneously attempts to reduce risk and to expand return over all time periods. Second, a duality relation is established between this generalized multi-horizon efficiency measure and an indirect mean-variance utility function, underscoring the natural interpretation of this generalized efficiency measure in terms of investor's preferences. Furthermore, the need to properly apply time discounting in multi-horizon mean-variance portfolio problems is argued for. An empirical illustration based on the original mutual fund data set in Morey and Morey Mutual fund performance appraisals: a multi-horizon perspective with endogenous benchmarking. Omega 1999;27:241–58] is added to contrast the new and the original approaches.