Optimization of a long-short portfolio under nonconvex transaction cost

Hiroshi Konno; Keisuke Akishino; Rei Yamamoto

doi:10.1007/s10589-005-2056-5

Optimization of a long-short portfolio under nonconvex transaction cost

Hiroshi Konno, Keisuke Akishino, Rei Yamamoto

Research output: Contribution to journal › Article › peer-review

25 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 language	English
Pages (from-to)	115-132
Number of pages	18
Journal	Computational Optimization and Applications
Volume	32
Issue number	1-2
DOIs	https://doi.org/10.1007/s10589-005-2056-5
Publication status	Published - 2005 Oct
Externally published	Yes

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

Access to Document

10.1007/s10589-005-2056-5

Cite this

@article{dad750188ea64959a93e4f746ed1cb40,

title = "Optimization of a long-short portfolio under nonconvex transaction cost",

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.",

keywords = "Branch and bound algorithm, Concave cost, Global optimization, Long-short portfolio, Portfolio theory, d.c. cost",

author = "Hiroshi Konno and Keisuke Akishino and Rei Yamamoto",

note = "Funding Information: The research of the first author was supported in part by the Grant-in-Aid for Scientific Research B(2) 15310122 and 15656025 of the Ministry of Science, Culture and Sports of Japan.",

year = "2005",

month = oct,

doi = "10.1007/s10589-005-2056-5",

language = "English",

volume = "32",

pages = "115--132",

journal = "Computational Optimization and Applications",

issn = "0926-6003",

publisher = "Springer Netherlands",

number = "1-2",

}

TY - JOUR

T1 - Optimization of a long-short portfolio under nonconvex transaction cost

AU - Konno, Hiroshi

AU - Akishino, Keisuke

AU - Yamamoto, Rei

N1 - Funding Information: The research of the first author was supported in part by the Grant-in-Aid for Scientific Research B(2) 15310122 and 15656025 of the Ministry of Science, Culture and Sports of Japan.

PY - 2005/10

Y1 - 2005/10

N2 - 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.

AB - 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.

KW - Branch and bound algorithm

KW - Concave cost

KW - Global optimization

KW - Long-short portfolio

KW - Portfolio theory

KW - d.c. cost

UR - http://www.scopus.com/inward/record.url?scp=23944474153&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=23944474153&partnerID=8YFLogxK

U2 - 10.1007/s10589-005-2056-5

DO - 10.1007/s10589-005-2056-5

M3 - Article

AN - SCOPUS:23944474153

SN - 0926-6003

VL - 32

SP - 115

EP - 132

JO - Computational Optimization and Applications

JF - Computational Optimization and Applications

IS - 1-2

ER -

Optimization of a long-short portfolio under nonconvex transaction cost

Abstract

Keywords

ASJC Scopus subject areas

Access to Document

Other files and links

Fingerprint

Cite this