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COR
2008

Robust multiperiod portfolio management in the presence of transaction costs

9 years 10 months ago
Robust multiperiod portfolio management in the presence of transaction costs
We study the viability of different robust optimization approaches to multiperiod portfolio selection. Robust optimization models treat future asset returns as uncertain coefficients in an optimization problem, and map the level of risk aversion of the investor to the level of tolerance of the total error in asset return forecasts. We suggest robust optimization formulations of the multiperiod portfolio optimization problem that are linear and computationally efficient. The linearity of the optimization problems is an advantage when complex additional requirements need to be imposed on the portfolio structure, e.g., limitations on positions in certain assets or tax constraints.We compare the performance of our robust formulations to the performance of the traditional single period mean-variance formulation frequently employed in the financial industry. 2006 Elsevier Ltd. All rights reserved.
Dimitris Bertsimas, Dessislava Pachamanova
Added 09 Dec 2010
Updated 09 Dec 2010
Type Journal
Year 2008
Where COR
Authors Dimitris Bertsimas, Dessislava Pachamanova
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