Question on Portfolio Construction Techniques

[Cipher2014]

Hi David,

I just want to clarify in Grinold Chapter 14, what's the relationship between the portfolio construction techniques (1) Screens (2) Stratification (3)Linear Programming (4) Quadratic Programming and the Refine Alpha and the use of a simple unconstrained mean-variance optimization to determine the active positions.

Are they 2 sets of fundamentally different techniques?

When would a portfolio manager use one vs the other?

Thanks!
Cipher

 

[Cipher2014]

Could someone help answer my question?

Thanks!
Cipher

 

[dhruv90.iitkgp]

Hi,

as per my knowledge , Screens , Stratification , LP and quadratic are used to construct portfolio as per the given risk return objectives and Feasible conditions.

To take in consideration different manager and Investor constraints , (after portfolio has been constructed) Refined alphas are being used for futher optimization. Mean Variance Optimization is used to allocate weights to different assets in the portfolios.