A Simple Algorithm for Optimal Portfolio Selection with Fixed Transaction Costs
AbstractThe general optimal portfolio selection problem with fixed transaction costs is a complex mathematical programming problem. However, by placing reasonable restrictions on the variance-covariance matrix of returns, it is possible to simplify the solution of the problem. Specifically if the structure of returns between securities is such that the pairwise correlation coefficients are approximately the same, a fairly simple algorithm which requires little computational effort can be employed. This method can also be extended to the case where changes in the information set necessitate a revision of an existing portfolio.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by INFORMS in its journal Management Science.
Volume (Year): 28 (1982)
Issue (Month): 3 (March)
finance; finance-investments; portfolio selection;
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Woodside-Oriakhi, M. & Lucas, C. & Beasley, J.E., 2013. "Portfolio rebalancing with an investment horizon and transaction costs," Omega, Elsevier, vol. 41(2), pages 406-420.
- Zhang, Wei-Guo & Xiao, Wei-Lin & Xu, Wei-Jun, 2010. "A possibilistic portfolio adjusting model with new added assets," Economic Modelling, Elsevier, vol. 27(1), pages 208-213, January.
- Sankaran, Jayaram K. & Patil, Ajay A., 1999. "On the optimal selection of portfolios under limited diversification," Journal of Banking & Finance, Elsevier, vol. 23(11), pages 1655-1666, November.
- Arie Kapteyn & Federica Teppa, 2009.
"Subjective Measures of Risk Aversion, Fixed Costs, and Portfolio Choice,"
DNB Working Papers
216, Netherlands Central Bank, Research Department.
- Kapteyn, Arie & Teppa, Federica, 2011. "Subjective measures of risk aversion, fixed costs, and portfolio choice," Journal of Economic Psychology, Elsevier, vol. 32(4), pages 564-580, August.
- Gianfranco Guastaroba & Renata Mansini & M. Speranza, 2009. "Models and Simulations for Portfolio Rebalancing," Computational Economics, Society for Computational Economics, vol. 33(3), pages 237-262, April.
- Xi-li Zhang & Wei-Guo Zhang & Wei-jun Xu & Wei-Lin Xiao, 2010. "Possibilistic Approaches to Portfolio Selection Problem with General Transaction Costs and a CLPSO Algorithm," Computational Economics, Society for Computational Economics, vol. 36(3), pages 191-200, October.
- Dimitris Bertsimas & Romy Shioda, 2009. "Algorithm for cardinality-constrained quadratic optimization," Computational Optimization and Applications, Springer, vol. 43(1), pages 1-22, May.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc).
If references are entirely missing, you can add them using this form.