We propose a linear bi-objective optimization to the problem of finding a portfolio that maximizes average excess return with respect to a benchmark index while minimizing underperformance over a learning period. We establish some theoretical results linking classical No Arbitrage conditions to the existence of a feasible portfolio for our model that strictly outperforms the index. Empirical analyses on publicly available real-world financial datasets show the effectiveness of the model and confirm the described theoretical results.
No arbitrage and a linear portfolio selection model / BRUNI, Renato; F. Cesarone; A. Scozzari; TARDELLA, Fabio. - In: ECONOMICS BULLETIN. - ISSN 1545-2921. - ELETTRONICO. - 2:(2013), pp. 1247-1258.
No arbitrage and a linear portfolio selection model
TARDELLA, Fabio
2013
Abstract
We propose a linear bi-objective optimization to the problem of finding a portfolio that maximizes average excess return with respect to a benchmark index while minimizing underperformance over a learning period. We establish some theoretical results linking classical No Arbitrage conditions to the existence of a feasible portfolio for our model that strictly outperforms the index. Empirical analyses on publicly available real-world financial datasets show the effectiveness of the model and confirm the described theoretical results.File | Dimensione | Formato | |
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