Trimability and Fast Optimization of Long-Short Portfolios

• Published in: Financial analysts journal Vol. 62; no. 2; pp. 36 - 46
• Main Authors: Jacobs, Bruce I., Levy, Kenneth N., Markowitz, Harry M.
• Format: Journal Article
• Language: English
• Published: Charlottesville Routledge 01.03.2006; CFA Institute; Taylor & Francis Ltd
• Subjects: Algorithms; Budget constraints; Cash; Covariance; Covariance matrices; Expected returns; Financial analysis; Financial portfolios; Financial research; Financial securities; Investors; Margin requirements; Mathematical models; Optimization; Optimization techniques; Options on stocks; Portfolio investments; Portfolio Management; Security portfolios; Statistical methods; Studies

Optimization of long-short portfolios through the use of fast algorithms takes advantage of models of covariance to simplify the equations that determine optimality. Fast algorithms exist for widely applied factor and scenario analysis for long-only portfolios. To allow their use in factor and scena...