This paper develops a prior-free version of Harry Markowitz’s efficient portfolio theory, which allows the decision maker to express their preferences with regard to risk and reward, even though they are unable to express a prior over potentially nonstationary returns. The corresponding optimal allocation strategies are admissible and interior, and they exhibit a form of momentum. Empirically, prior-free efficient allocation strategies successfully exploit the time-varying risk premiums present in historical returns.

An investor with correct beliefs should not experience large drawdowns, but how do we know our beliefs are correct? Minmax drawdown control is an asset allocation framework designed to guarantee low drawdowns against both safe and risky underlying assets. As such it is well suited to deal with novel, or changing assets, such as crypto-currencies.