Abstract: This paper is concerned with Mean-Variance portfolio selection problem in a continuoustime enlarged Markov-modulated market.The object is to minimize the variance of the terminal wealth under the constraint that terminal wealth is equivalent to d,( (d∈R) ).The problem is formulated as a stochastic optimal linear-quadratic (LQ) control problem.We apply stochastic theory to solve this problem.Efficient investment strategies as well as the mean-variance efficient frontier are then analytically derived. An example illustrating these results is also presented.

Key words: continuous time, mean-variance portfolio selection, enlargement of Markovmodulated market, efficient frontier, HJB equation