The PortScenMinMADA.xlsx Model

Mean Absolute Deviation (MAD) for Portfolio Selection

View the model
Download the model

Minimize the mean absolute deviation about the mean of the portfolio returns,
subject to achieving a target expected return.

M.A.D = sum( s: probability (s)*|ReturnOfScenario(s) - ExpectedReturn|)

Minimizing MAD can be done using linear programing
because one can linearize: d(s) =|ReturnOfScenario(s) - ExpectedReturn|


Portfolio | Risk Management | MAD | Mean Absolute Deviation |