Dantzig Type Optimization Method with Applications to Portfolio Selection

Seyoung Park, Eun Ryung Lee, Sungchul Lee and Geonwoo Kim
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Seyoung Park: Department of Statistics, Sungkyunkwan University, Jongno-gu, Seoul 03063, Korea
Eun Ryung Lee: Department of Statistics, Sungkyunkwan University, Jongno-gu, Seoul 03063, Korea
Sungchul Lee: Department of Mathematics and Computational Science & Engineering, Yonsei University, 50 Yonsei-ro Seodaemun-gu, Seoul 03722, Korea
Geonwoo Kim: School of Liberal Arts, Seoul National University of Science and Technology, Seoul 01811, Korea

Sustainability, 2019, vol. 11, issue 11, 1-32

Abstract: This paper investigates a novel optimization problem motivated by sparse, sustainable and stable portfolio selection. The existing benchmark portfolio via the Dantzig type optimization is used to construct a sparse, sustainable and stable portfolio. Based on the formulations, this paper proposes two portfolio selection methods, west and north portfolio selection, and investigates their empirical properties. Numerical results presented for 12 datasets and various simulated data show that the west selection can reduce risk, and the north selection may outperform the benchmark as to risk-adjusted returns (based on, e.g., information ratio and Sharpe ratio).

Keywords: Sparse model; Dantzig selector; Portfolio optimization; Sharpe ratio (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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