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Short Selling and Efficient Sets

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  • Alexander, Gordon J

Abstract

The effects of short selling on the composition and location of the efficient set has been analyzed in a variety of ways. However, the situation typically facing investors where the initial margin requirement is less than 100 percent and the risk-free interest rate that is paid on the short proceeds is less than the rate paid on initial margin has not previously been considered. The Elton-Gruber-Padberg algorithm (1976, 1978), subject to certain modifications, is shown here to be capable of identifying the efficient set under such conditions. Copyright 1993 by American Finance Association.

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  • Alexander, Gordon J, 1993. "Short Selling and Efficient Sets," Journal of Finance, American Finance Association, vol. 48(4), pages 1497-1506, September.
    • Handle: RePEc:bla:jfinan:v:48:y:1993:i:4:p:1497-1506
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    Citations

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    Cited by:

    1. Levy, Moshe & Ritov, Yaacov, 2001. "Portfolio Optimization with Many Assets: The Importance of Short-Selling," University of California at Los Angeles, Anderson Graduate School of Management qt41x4t67m, Anderson Graduate School of Management, UCLA.
    2. 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.
    3. Kwan, Clarence C. Y., 1997. "Portfolio selection under institutional procedures for short selling: Normative and market-equilibrium considerations," Journal of Banking & Finance, Elsevier, vol. 21(3), pages 369-391, March.
    4. Alexander, Gordon J. & Baptista, Alexandre M., 2010. "Active portfolio management with benchmarking: A frontier based on alpha," Journal of Banking & Finance, Elsevier, vol. 34(9), pages 2185-2197, September.
    5. C.Y. Kwan, Clarence, 1999. "A note on market-neutral portfolio selection," Journal of Banking & Finance, Elsevier, vol. 23(5), pages 773-800, May.
    6. Bruce I. Jacobs & Kenneth N. Levy & Harry M. Markowitz, 2005. "Portfolio Optimization with Factors, Scenarios, and Realistic Short Positions," Operations Research, INFORMS, vol. 53(4), pages 586-599, August.
    7. Tahereh Khodamoradi & Maziar Salahi & Ali Reza Najafi, 2021. "Cardinality-constrained portfolio optimization with short selling and risk-neutral interest rate," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 44(1), pages 197-214, June.
    8. Liu, Wenbin & Zhou, Zhongbao & Liu, Debin & Xiao, Helu, 2015. "Estimation of portfolio efficiency via DEA," Omega, Elsevier, vol. 52(C), pages 107-118.
    9. Alexander, Gordon J. & Baptista, Alexandre M., 2008. "Active portfolio management with benchmarking: Adding a value-at-risk constraint," Journal of Economic Dynamics and Control, Elsevier, vol. 32(3), pages 779-820, March.
    10. Basak, Gopal & Jagannathan, Ravi & Sun, Guoqiang, 2002. "A direct test for the mean variance efficiency of a portfolio," Journal of Economic Dynamics and Control, Elsevier, vol. 26(7-8), pages 1195-1215, July.
    11. Klein, Peter, 1998. "The capital gain lock-in effect with short sales constraints," Journal of Banking & Finance, Elsevier, vol. 22(12), pages 1533-1558, December.

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