The mean-variance rule (M-V) conforms with the expected utility paradigm only in limited and economically unacceptable scenarios. Thus, the most widely employed portfolio-selection rule seemingly loses ground. We show with the commonly employed utility functions in economics, with a preference for a positive skewness, that choosing from the M-V efficient frontier conforms with expected utility maximization even with long investment horizon and skewed distributions of returns. The economic loss induced by choosing from the M-V frontier is negligible. Thus, the M-V rule is universal, or almost universal, provided that the commonly employed utility functions in economics are employed. This is an astonishing result that even Markowitz has not dreamed of.
Haim Levy (Sat,) studied this question.