Portfolio revision under mean-variance and mean-CVaR with transaction costs

Portfolio revision under mean-variance and mean-CVaR with transaction costs The portfolio revision process usually begins with a portfolio of assets rather than cash. As a result, some assets must be liquidated to permit investment in other assets, incurring transaction costs that should be directly integrated into the portfolio optimization problem. This paper discusses and analyzes the impact of transaction costs on the optimal portfolio under mean-variance and mean-conditional value-at-risk strategies. In addition, we present some analytical solutions and empirical evidence for some special situations to understand the impact of transaction costs on the portfolio revision process. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

Portfolio revision under mean-variance and mean-CVaR with transaction costs

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Publisher
Springer US
Copyright
Copyright © 2012 by Springer Science+Business Media, LLC
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1007/s11156-012-0292-1
Publisher site
See Article on Publisher Site

Abstract

The portfolio revision process usually begins with a portfolio of assets rather than cash. As a result, some assets must be liquidated to permit investment in other assets, incurring transaction costs that should be directly integrated into the portfolio optimization problem. This paper discusses and analyzes the impact of transaction costs on the optimal portfolio under mean-variance and mean-conditional value-at-risk strategies. In addition, we present some analytical solutions and empirical evidence for some special situations to understand the impact of transaction costs on the portfolio revision process.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: May 25, 2012

References

  • Expected shortfall: a natural coherent alternative to Value-at-Risk
    Acerbi, C; Tasche, D
  • Risks and portfolio decisions involving hedge funds
    Agarwal, V; Naik, NY
  • Evaluating effects of excess kurtosis on VaR estimates: evidence for international stock indices
    Baixauli, JS; Alvarez, S
  • Shortfall as a risk measure: properties, optimization and applications
    Bertsimas, D; Lauprete, GJ; Samarov, A

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