Mean-variance portfolio optimization with parameter sensitivity control

doi:10.1080/10556788.2016.1181758

CORC > 上海财经大学 > 上海财经大学

	Mean-variance portfolio optimization with parameter sensitivity control
	Cui, Xueting 1; Zhu, Shushang 2; Li, Duan 3; Sun, Jie 4
刊名	OPTIMIZATION METHODS & SOFTWARE
	2016-08
卷号	31 期号:4 页码:755-774
关键词	mean-variance model sensitivity control non-convex quadratically constrained quadratic programming branch-and-bound
ISSN号	1055-6788
DOI	10.1080/10556788.2016.1181758
英文摘要	The mean-variance (MV) portfolio selection model, which aims to maximize the expected return while minimizing the risk measured by the variance, has been studied extensively in the literature and regarded as a powerful guiding principle in investment practice. Recognizing the importance to reduce the impact of parameter estimation error on the optimal portfolio strategy, we integrate a set of parameter sensitivity constraints into the traditional MV model, which can also be interpreted as a model with marginal risk control on assets. The resulted optimization framework is a quadratic programming problem with non-convex quadratic constraints. By exploiting the special structure of the non-convex constraints, we propose a convex quadratic programming relaxation and develop a branch-and-bound global optimization algorithm. A significant feature of our algorithm is its special branching rule applied to the imposed auxiliary variables, which are of lower dimension than the original decision variables. Our simulation analysis and empirical test demonstrate the pros and cons of the proposed MV model with sensitivity control and indicate the cases where sensitivity control is necessary and beneficial. Our branch-and-bound procedure is shown to be favourable in computational efficiency compared with the commercial global optimization software BARON.
WOS研究方向	Computer Science ; Operations Research & Management Science ; Mathematics
语种	英语
出版者	TAYLOR & FRANCIS LTD
WOS记录号	WOS:000377145400006
内容类型	期刊论文
源URL	[http://10.2.47.112/handle/2XS4QKH4/1240]
专题	上海财经大学
通讯作者	Zhu, Shushang
作者单位	1.Shanghai Univ Finance & Econ, Sch Math, Shanghai 200433, Peoples R China; 2.Sun Yat Sen Univ, Sun Yat Sen Business Sch, Dept Finance & Investment, Guangzhou 510275, Guangdong, Peoples R China; 3.Chinese Univ Hong Kong, Dept Syst Engn & Engn Management, Shatin, Hong Kong, Peoples R China; 4.Curtin Univ, Dept Math & Stat, Perth, WA 6845, Australia
推荐引用方式 GB/T 7714	Cui, Xueting,Zhu, Shushang,Li, Duan,et al. Mean-variance portfolio optimization with parameter sensitivity control[J]. OPTIMIZATION METHODS & SOFTWARE,2016,31(4):755-774.
APA	Cui, Xueting,Zhu, Shushang,Li, Duan,&Sun, Jie.(2016).Mean-variance portfolio optimization with parameter sensitivity control.OPTIMIZATION METHODS & SOFTWARE,31(4),755-774.
MLA	Cui, Xueting,et al."Mean-variance portfolio optimization with parameter sensitivity control".OPTIMIZATION METHODS & SOFTWARE 31.4(2016):755-774.