Survival's Arbitrage Optimier--a sample to show Markowitz theory's defect and why American Longterm Capital Co. failed.

Player 3 follows Markowitz's theory, using a portfolio with grater expectation  and less standard square error.

Yet, Survivor follows  Lu's theory, using a portfolio with less expectation and greater  standard square error, but great geometric mean return.

Player 3 always has the danger of sudden death as American Longterm Capital Co..

Portfolio optimizing window:


Invetment simulating window (assume to repeat invest many times in the same uncertainy case):

AMR--arithmetic mean return
SD-- standard deviation or standard square error
GMR--geometric mean return or compoud interest
Tr--triangle rist =sqrt(AMR*AMR-GMR*GMR)