Advanced Search
MyIDEAS: Login to save this article or follow this journal

Computational aspects of alternative portfolio selection models in the presence of discrete asset choice constraints

Contents:

Author Info

  • N. J. Jobst
  • M. D. Horniman
  • C. A. Lucas
  • G. Mitra
Registered author(s):

    Abstract

    We consider the mean-variance (M-V) model of Markowitz and the construction of the risk-return efficient frontier. We examine the effects of applying buy-in thresholds, cardinality constraints and transaction roundlot restrictions to the portfolio selection problem. Such discrete constraints are of practical importance but make the efficient frontier discontinuous. The resulting quadratic mixed-integer (QMIP) problems are NP-hard and therefore computing the entire efficient frontier is computationally challenging. We propose alternative approaches for computing this frontier and provide insight into its discontinuous structure. Computational results are reported for a set of benchmark test problems.

    Download Info

    If 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.
    File URL: http://www.tandfonline.com/doi/abs/10.1088/1469-7688/1/5/301
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Quantitative Finance.

    Volume (Year): 1 (2001)
    Issue (Month): 5 ()
    Pages: 489-501

    as in new window
    Handle: RePEc:taf:quantf:v:1:y:2001:i:5:p:489-501

    Contact details of provider:
    Web page: http://www.tandfonline.com/RQUF20

    Order Information:
    Web: http://www.tandfonline.com/pricing/journal/RQUF20

    Related research

    Keywords:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Walter Briec & Kristiaan Kerstens & Octave Jokung, 2007. "Mean-Variance-Skewness Portfolio Performance Gauging: A General Shortage Function and Dual Approach," Management Science, INFORMS, vol. 53(1), pages 135-149, January.
    2. Derigs, Ulrich & Marzban, Shehab, 2009. "New strategies and a new paradigm for Shariah-compliant portfolio optimization," Journal of Banking & Finance, Elsevier, vol. 33(6), pages 1166-1176, June.
    3. Mansini, Renata & Ogryczak, Wlodzimierz & Speranza, M. Grazia, 2014. "Twenty years of linear programming based portfolio optimization," European Journal of Operational Research, Elsevier, vol. 234(2), pages 518-535.
    4. Enrico Angelelli & Renata Mansini & M. Speranza, 2012. "Kernel Search: a new heuristic framework for portfolio selection," Computational Optimization and Applications, Springer, vol. 51(1), pages 345-361, January.
    5. M. Bartholomew-Biggs & S. Kane, 2009. "A global optimization problem in portfolio selection," Computational Management Science, Springer, vol. 6(3), pages 329-345, August.
    6. Konstantinos Anagnostopoulos & Georgios Mamanis, 2011. "Multiobjective evolutionary algorithms for complex portfolio optimization problems," Computational Management Science, Springer, vol. 8(3), pages 259-279, August.
    7. Jobst, Norbert J. & Mitra, Gautam & Zenios, Stavros A., 2006. "Integrating market and credit risk: A simulation and optimisation perspective," Journal of Banking & Finance, Elsevier, vol. 30(2), pages 717-742, February.
    8. Hoai Le Thi & Mahdi Moeini & Tao Pham Dinh, 2009. "Portfolio selection under downside risk measures and cardinality constraints based on DC programming and DCA," Computational Management Science, Springer, vol. 6(4), pages 459-475, October.
    9. Castro, F. & Gago, J. & Hartillo, I. & Puerto, J. & Ucha, J.M., 2011. "An algebraic approach to integer portfolio problems," European Journal of Operational Research, Elsevier, vol. 210(3), pages 647-659, May.
    10. Aouni, Belaid & Colapinto, Cinzia & La Torre, Davide, 2014. "Financial portfolio management through the goal programming model: Current state-of-the-art," European Journal of Operational Research, Elsevier, vol. 234(2), pages 536-545.
    11. Angelelli, Enrico & Mansini, Renata & Speranza, M. Grazia, 2008. "A comparison of MAD and CVaR models with real features," Journal of Banking & Finance, Elsevier, vol. 32(7), pages 1188-1197, July.
    12. Woodside-Oriakhi, M. & Lucas, C. & Beasley, J.E., 2011. "Heuristic algorithms for the cardinality constrained efficient frontier," European Journal of Operational Research, Elsevier, vol. 213(3), pages 538-550, September.
    13. Corazza, Marco & Favaretto, Daniela, 2007. "On the existence of solutions to the quadratic mixed-integer mean-variance portfolio selection problem," European Journal of Operational Research, Elsevier, vol. 176(3), pages 1947-1960, February.
    14. Chen, Wei & Zhang, Wei-Guo, 2010. "The admissible portfolio selection problem with transaction costs and an improved PSO algorithm," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(10), pages 2070-2076.
    15. K.P. Anagnostopoulos & P.D. Chatzoglou & S. Katsavounis, 2010. "A reactive greedy randomized adaptive search procedure for a mixed integer portfolio optimization problem," Managerial Finance, Emerald Group Publishing, vol. 36(12), pages 1057-1065, December.
    16. Wu, Lan & Yang, Yuehan & Liu, Hanzhong, 2014. "Nonnegative-lasso and application in index tracking," Computational Statistics & Data Analysis, Elsevier, vol. 70(C), pages 116-126.
    17. Yucheng Kao & Hsiu-Tzu Cheng, 2013. "Bacterial Foraging Optimization Approach to Portfolio Optimization," Computational Economics, Society for Computational Economics, vol. 42(4), pages 453-470, December.
    18. Briec, Walter & Kerstens, Kristiaan, 2009. "Multi-horizon Markowitz portfolio performance appraisals: A general approach," Omega, Elsevier, vol. 37(1), pages 50-62, February.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:taf:quantf:v:1:y:2001:i:5:p:489-501. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.