TY - JOUR
T1 - Selecting a discrete portfolio
AU - Olszewski, Wojciech
AU - Vohra, Rakesh
N1 - Publisher Copyright:
© 2014 Elsevier B.V.
Copyright:
Copyright 2015 Elsevier B.V., All rights reserved.
PY - 2014
Y1 - 2014
N2 - We study the problem of selecting an optimal portfolio out of a finite set of available assets. Assets are characterized by their expected returns and the covariance matrix, and investors are assumed to have a mean-variance utility, that is, their utility function is linear in the mean and variance of the portfolio they hold.When assets are negatively correlated, or even when a slightly more general condition is satisfied, we provide an algorithm for selecting an optimal portfolio. We illustrate the usefulness of this algorithm by some comparative statics result. When assets can be positively correlated, we deliver a negative result regarding the existence of useful algorithms for selecting an optimal portfolio.
AB - We study the problem of selecting an optimal portfolio out of a finite set of available assets. Assets are characterized by their expected returns and the covariance matrix, and investors are assumed to have a mean-variance utility, that is, their utility function is linear in the mean and variance of the portfolio they hold.When assets are negatively correlated, or even when a slightly more general condition is satisfied, we provide an algorithm for selecting an optimal portfolio. We illustrate the usefulness of this algorithm by some comparative statics result. When assets can be positively correlated, we deliver a negative result regarding the existence of useful algorithms for selecting an optimal portfolio.
KW - Optimal discrete portfolios
KW - Selection algorithms
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U2 - 10.1016/j.jmateco.2014.10.001
DO - 10.1016/j.jmateco.2014.10.001
M3 - Article
AN - SCOPUS:84922623523
VL - 55
SP - 69
EP - 73
JO - Journal of Mathematical Economics
JF - Journal of Mathematical Economics
SN - 0304-4068
IS - 1
ER -