Mean-Absolute Deviation Portfolio Models with Discrete Choice Constraints

نویسندگان

  • Roy H. Kwon
  • Stephen J. Stoyan
چکیده

In this paper, we consider the problem of incorporating a wide set of real-world trading constraints to the meanvariance portfolio framework. Instead of using the mean-variance model directly, we use the equivalent Mean-Absolute Deviation (MAD) linear programming formulation. The addition of the trading constraints transforms the MAD model to a mixed-integer linear programming problem. We solve both the mean-variance and MAD models with the various trading constraints using a commercial solver and find that MAD model is substantially more tractable. In addition, a heuristic is developed for the extended MAD model to provide solutions for larger problem instances.

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عنوان ژورنال:
  • Algorithmic Operations Research

دوره 6  شماره 

صفحات  -

تاریخ انتشار 2011