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Portfolio optimization under transfer coefficient constraint

Author

Listed:
  • Rei Yamamoto

    (Mitsubishi UFJ Trust Investment Technology Institute Co., Ltd. 2–6)

  • Takuya Ishibashi
  • Hiroshi Konno

Abstract

This article is concerned with a portfolio optimization problem subject to a transfer coefficient constraint, which is intended to generate an enhanced index portfolio with a good ex-post performance. We will show that a standard mean-tracking error model with transfer coefficient constraint can be formulated as a convex minimization problem, which can be solved by a standard optimization software. Also we will show that the transfer coefficient constraint plays an essential role for constructing an enhanced index fund with a good ex-post performance using real stock data in Tokyo Stock Exchange.

Suggested Citation

  • Rei Yamamoto & Takuya Ishibashi & Hiroshi Konno, 2012. "Portfolio optimization under transfer coefficient constraint," Journal of Asset Management, Palgrave Macmillan, vol. 13(1), pages 51-57, February.
    • Handle: RePEc:pal:assmgt:v:13:y:2012:i:1:d:10.1057_jam.2011.13
    DOI: 10.1057/jam.2011.13
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    References listed on IDEAS

    as
    1. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    2. Carhart, Mark M, 1997. "On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
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