A multistage Mean/Variance approach for portfolio management in the Mexican market

This paper describes the use of Mean/Variance multistage portfolio management for building efficient frontiers. The maximization of the returns yields the maximum and the variance minimization the minimum points in the efficient frontier. The efficient frontier is the graph describing all the optimal options between these two points. The intermediate points are obtained minimizing the variance (risk measure) subject to different percentages of the maximum utility expected. According to the investor's characteristics, a point in the graph, containing a complete set of investment strategies can be chosen. The stochastic quadratic and linear models use a scenario tree to represent the multistage discretization of the random returns. The examples are applied to the Mexican bursaries market.