Portfolio Mean-Variance Approach Modifications:Modulus Function, Principles of Compromise, and ‘Min–Max’ Approach

We offer a variant for the problem of portfolio selection, based on the modification of quadratic function. It reduces overestimation of expected returns that arise from large deviations of the market condition. Further, we examine the modified ‘min–max’ approach to portfolio structure. We obtain analytical expressions to solve the portfolio selection model for a few cases. Finally, we offer certain compromise principles between criterial values of the expected return/risk.