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Harry Marmer Hosts CFA Society Toronto Luncheon Presentation

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Harry Marmer introduces Dr. Richard Michaud, Ph.D., President of New Frontier, who discusses Advances in Asset Allocation at CFA Society Toronto Luncheon

Dr. Richard Michaud shared his insights on the advances in asset allocation. Markowitz (1952) mean-variance (MV) optimization has been the theoretical standard for defining portfolio optimality for more than sixty years. However, MV optimization in practice is unstable, highly sensitive to small changes in estimates and difficult to manage. Black and Litterman (BL) (1992) propose to solve the problem of instability of MV optimization with a procedure that produces a single optimal portfolio based on an assumed optimal market portfolio and active views. Dr. Michaud reviewed the intricacies of three major optimization methods from one of the major current researchers in this field – Markowitz (1952) mean-variance (MV) optimization, Black and Litterman (BL) (1992) , Michaud (1998) optimization. The main learning outcome from the presentation was for participants to gain a solid understanding of classic and advanced mean-variance optimization methods as well as the strengths, weaknesses, and applicability of each approach.