Selecting a discrete portfolio

Wojciech Olszewski*, Rakesh Vohra

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

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.

Original languageEnglish (US)
Pages (from-to)69-73
Number of pages5
JournalJournal of Mathematical Economics
Volume55
Issue number1
DOIs
StatePublished - 2014

Keywords

  • Optimal discrete portfolios
  • Selection algorithms

ASJC Scopus subject areas

  • Economics and Econometrics
  • Applied Mathematics

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