IDEAS home Printed from
   My bibliography  Save this paper

Portfolio Selection with minimum transaction lots: an approach with dual expected utility


  • Marisa Cenci


  • Floriana Filippini


In this paper we analyse the portfolio selectionproblem with minimum transactionlots in the context of non-expected utility theory. We assume that the decisionmaker ranks the alternatives by using a specific DualExpectedUtility. This functionallows portfolio values less or equal a fixed benchmark tobe weighted inadifferent way from values greater than the fixedbenchmark. Under normallydistributedreturns and opportunechoice ofthe benchmark, the suggested approach leads to an NP-complete problemandhas the advantage ofusing mixed linear programming to obtainthe optimal portfolio. We also show resultsobtained by implementing the model on the Italian stock market. (keywords: dual expectedutility, portfolio selection, NP-completeness, linear programming with mixed variables)

Suggested Citation

  • Marisa Cenci & Floriana Filippini, 2005. "Portfolio Selection with minimum transaction lots: an approach with dual expected utility," Departmental Working Papers of Economics - University 'Roma Tre' 0050, Department of Economics - University Roma Tre.
  • Handle: RePEc:rtr:wpaper:0050

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Floriana Filippini & Marisa Cenci, 2005. "Portfolio selection: a linear approach with dual expected utility," Departmental Working Papers of Economics - University 'Roma Tre' 0048, Department of Economics - University Roma Tre.
    2. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
    3. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
    4. Amos Tversky & Daniel Kahneman, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 1039-1061.
    5. Benati, Stefano, 2003. "The optimal portfolio problem with coherent risk measure constraints," European Journal of Operational Research, Elsevier, vol. 150(3), pages 572-584, November.
    6. Mansini, Renata & Speranza, Maria Grazia, 1999. "Heuristic algorithms for the portfolio selection problem with minimum transaction lots," European Journal of Operational Research, Elsevier, vol. 114(2), pages 219-233, April.
    7. Hadar, Josef & Seo, Tae Kun, 1995. "Asset diversification in Yaari's dual theory," European Economic Review, Elsevier, vol. 39(6), pages 1171-1180, June.
    Full references (including those not matched with items on IDEAS)

    More about this item


    dual expected utility; portfolio selection; NP-completeness; linear programming with;

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rtr:wpaper:0050. 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: (Telephone for information). General contact details of provider: .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.