Portfolio Optimization with Factors, Scenarios, and Realistic Short Positions

• Published in: Operations research Vol. 53; no. 4; pp. 586 - 599
• Main Authors: Jacobs, Bruce I, Levy, Kenneth N, Markowitz, Harry M
• Format: Journal Article
• Language: English
• Published: Linthicum, MD INFORMS 01.07.2005; Institute for Operations Research and the Management Sciences
• Subjects: Algorithms; Applied sciences; Covariance; Covariance matrices; Exact sciences and technology; Expected returns; finance; Financial portfolios; Investors; Management; Margin requirements; Mathematical optimization; Methods; Modeling; Operational research and scientific management; Operational research. Management science; Portfolio management; Portfolio theory; portfolio:optimization with short sales; Security portfolios; Short sales; United States; portfolio: optimization with short sales; Covariance matrix; Portfolio management; Finance; Optimization

This paper presents fast algorithms for calculating mean-variance efficient frontiers when the investor can sell securities short as well as buy long, and when a factor and/or scenario model of covariance is assumed. Currently, fast algorithms for factor, scenario, or mixed (factor and scenario) mod...