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Optimal portfolios using Linear Programming Models
Mälardalens högskola, Ekonomihögskolan.ORCID iD: 0000-0002-1545-3956
Mälardalens högskola, Institutionen för matematik och fysik.ORCID iD: 0000-0001-9230-1596
2004 (English)In: Journal of the Operational Research Society, ISSN 0160-5682, E-ISSN 1476-9360, Vol. 55, no 11, p. 1169-1177Article in journal (Refereed) Published
Abstract [en]

The classical Quadratic Programming (QP) formulation of the well-known portfolio selection problem has traditionally been regarded as cumbersome and time consuming. This paper formulates two additional models, (i) maximin, and (ii) minimization of mean absolute deviation. Data from 67 securities over 48 months are used to examine to what extent all three formulations provide similar portfolios. As expected, the maximin formulation yields the highest return and risk, while the QP formulation provides the lowest risk and return, which also creates the efficient frontier. The minimization of mean absolute deviation is close to the QP formulation. When the expected returns are confronted with the true ones at the end of a six months period, the maximin portfolios seem to be the most robust of all.

Place, publisher, year, edition, pages
Taylor & Francis , 2004. Vol. 55, no 11, p. 1169-1177
Keywords [en]
Finance, linear programming, investment analysis, risk analysis
National Category
Computational Mathematics Economics
Identifiers
URN: urn:nbn:se:hig:diva-38315DOI: 10.1057/palgrave.jors.2601765ISI: 000224382200006Scopus ID: 2-s2.0-7544232197OAI: oai:DiVA.org:hig-38315DiVA, id: diva2:1649107
Available from: 2007-10-03 Created: 2022-04-02Bibliographically approved

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Papahristodoulou, ChristosDotzauer, Erik

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CiteExportLink to record
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  • sv-SE
  • en-GB
  • en-US
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  • nn-NO
  • nn-NB
  • de-DE
  • Other locale
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Output format
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