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The Geometry of Risk and Reward
An application of Euclidean linear algebra
by
Victor T. Norton, Jr.
Department of Mathematics and Statistics
Bowling Green State University
Abstract
We adopt a geometric view of Markowitz's and Sharpe's mean-variance theory
of portfolio choice. Our model posits that expected reward is a linear
function of risk. This axiom is generally true after singular value
reduction of data. The Sharpe-optimal long portfolio leads to an investment
strategy that appears to have considerable merit.
With current
SOLNG mix
| quarter |
VIGRX | VIVAX |
VEXMX | VBMFX |
| 2002q3 | 0.0% | 0.0% | 7.7% | 92.3% |