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The Optimal Selection of Small Portfolios


  • B. Blog

    (Van Gend en Loos, Utrecht, The Netherlands)

  • G. van der Hoek

    (Erasmus University, Rotterdam, The Netherlands)

  • A. H. G. Rinnooy Kan

    (Erasmus University, Rotterdam, The Netherlands)

  • G. T. Timmer

    (Erasmus University, Rotterdam, The Netherlands)


Portfolios that are risk-return efficient in the sense of Markowitz sometimes contain too many securities to be attractive to the small investor. An optimal portfolio subject to a size constraint can be found by an implicit enumeration algorithm, that is much faster than a previous approach and moreover allows the inclusion of securities whose \beta -coefficient is negative. A simple and computationally very efficient heuristic method that almost always produces optimal portfolios is described as well.

Suggested Citation

  • B. Blog & G. van der Hoek & A. H. G. Rinnooy Kan & G. T. Timmer, 1983. "The Optimal Selection of Small Portfolios," Management Science, INFORMS, vol. 29(7), pages 792-798, July.
  • Handle: RePEc:inm:ormnsc:v:29:y:1983:i:7:p:792-798

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    Cited by:

    1. 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.
    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. White, D.J., 1998. "Epsilon-dominating solutions in mean-variance portfolio analysis," European Journal of Operational Research, Elsevier, vol. 105(3), pages 457-466, March.


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