Optimization of a long-short portfolio under nonconvex transaction cost

Hiroshi Konno, Keisuke Akishino, Rei Yamamoto

Research output: Contribution to journalArticle

17 Citations (Scopus)

Abstract

The purpose of this paper is to propose a practical branch and bound algorithm for solving a class of long-short portfolio optimization problem with concave and d.c. transaction cost and complementarity conditions on the variables. We will show that this algorithm can solve a problem of practical size and that the long-short strategy leads to a portfolio with significantly better risk-return structure compared with standard purchase only portfolio both in terms of ex-ante and ex-post performance.

Original languageEnglish
Pages (from-to)115-132
Number of pages18
JournalComputational Optimization and Applications
Volume32
Issue number1-2
DOIs
Publication statusPublished - 2005 Oct 1
Externally publishedYes

Keywords

  • Branch and bound algorithm
  • Concave cost
  • Global optimization
  • Long-short portfolio
  • Portfolio theory
  • d.c. cost

ASJC Scopus subject areas

  • Control and Optimization
  • Computational Mathematics
  • Applied Mathematics

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