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| Author: | Konno, H. Wijayanayake, A. |
| Title: | Mean-absolute deviation portfolio optimization model under transaction costs |
| Journal: | Journal of the Operations Research Society of Japan
1999 : DEC, VOL. 42:4, p. 422-435 |
| Index terms: | OPERATIONAL RESEARCH TRANSACTION COSTS OPTIMIZATION |
| Language: | eng |
| Abstract: | The authors will propose a branch and bound algorithm for solving a portfolio optimization model under nonconvex transaction costs. It is well known that the unit transaction cost is larger when the amount of transaction is small while it remains stable up to a certain point and then increases due to illiquidity effects. Therefore, the transaction cost function is typically nonconvex. The existence of nonconvex transaction costs very much affects the optimal portfolio particularly when the amount of fund is small. |
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