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Liquidity Constraints for Portfolio Selection Based on Financial Volume

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  • Eduardo Bered Fernandes Vieira

    (Universidade Federal do Rio Grande do Sul)

  • Tiago Pascoal Filomena

    (Universidade Federal do Rio Grande do Sul)

Abstract

This paper proposes liquidity constraints for portfolio selection models based on financial volume. The constraints consider different parameters such as the value of the portfolio and the acceptable liquidation level. Different portfolio selection models were tested in different scenarios. The liquidation level and its impact on the risk level are verified in the portfolio. The results are robust for all of the performed tests, with reasonable levels of portfolio liquidation. As expected, there is an increase in the level of risk of liquidity-restricted portfolios.

Suggested Citation

  • Eduardo Bered Fernandes Vieira & Tiago Pascoal Filomena, 2020. "Liquidity Constraints for Portfolio Selection Based on Financial Volume," Computational Economics, Springer;Society for Computational Economics, vol. 56(4), pages 1055-1077, December.
    • Handle: RePEc:kap:compec:v:56:y:2020:i:4:d:10.1007_s10614-019-09957-0
    DOI: 10.1007/s10614-019-09957-0
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