A method for evaluating statistical congruence of an existing or putative portfolio
with a target portfolio, both the current portfolio and the target portfolio having
a plurality of assets. A mean-variance efficient portfolio is computed for a plurality
of simulations of input data statistically consistent with an expected return and
expected standard deviation of return, and each such portfolio is associated, by
means of an index, with a specified portfolio on the mean variance efficient frontier.
The number of simulations and the number of simulations periods is specified on
the basis of a specified information correlation value. A statistical mean of the
index-associated mean-variance efficient portfolios is used for evaluating a portfolio,
in accordance with a specified balancing test, for statistical consistency with
a specified risk objective and, additionally, for defining investment-relevant
allocation ranges of portfolio weights.
