Revisiting mean-variance optimization

Mean-variance optimization is so well accepted that we often take it for gr anted. In this article the authors examine the impact of relaxing its assum ptions in a fixed-income context. They examine particularly whether the sub stantial overweighting of non-Treasury bonds that is recommended in a mean- variance context holds up under alternative return distributions and utilit y functions. They also show how to incorporate scenario forecasting into an optimization framework.