An empirical study on discrete optimization models forportfolio selection

Xueting Cui; Xiaoling Sun; Dan Sha

doi:10.3934/jimo.2009.5.33

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2009, Volume 5, Issue 1: 33-46. Doi: 10.3934/jimo.2009.5.33

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An empirical study on discrete optimization models for portfolio selection

1.
Department of Mathematics, Shanghai University, Shanghai 200444
2.
School of Management, Fudan University, Shanghai 200433
3.
Business School, Shanghai Institute of Foreign Trade, Shanghai 201100

Received: March 31, 2008

Revised: September 30, 2008

Published: December 2008

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Abstract

In this paper, we investigate four discrete optimization models arising from single period portfolio selection: Mean-variance model, mean-absolute-deviation model, minimax model and conditional Value-at-Risk model. These four models are established by considering the minimal transaction unit and the cardinality constraint in real-world investment practice. Extensive computational results are reported to compare the features of the models. We evaluate the performance of the models by analyzing the in-sample and out-of-sample numerical results with real data from Shanghai Stock Exchange.

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Mathematics Subject Classification: Primary: 91B28; 90C10; Secondary: 90C11.

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