Portfolio Optimization Under a Minimax Rule

Xiaoqiang Cai (), Kok-Lay Teo (), Xiaoqi Yang () and Xun Yu Zhou ()
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Xiaoqiang Cai: Department of Systems Engineering and Engineering Management, The Chinese University of Hong Kong, Shatin, N.T., Hong Kong
Kok-Lay Teo: Department of Applied Mathematics, The Hong Kong Polytechnic University, Kowloon, Hong Kong
Xiaoqi Yang: Department of Applied Mathematics, The Hong Kong Polytechnic University, Kowloon, Hong Kong
Xun Yu Zhou: Department of Systems Engineering and Engineering Management, The Chinese University of Hong Kong, Shatin, N.T., Hong Kong

Management Science, 2000, vol. 46, issue 7, 957-972

Abstract: This paper provides a new portfolio selection rule. The objective is to minimize the maximum individual risk and we use an l \infty function as the risk measure. We provide an explicit analytical solution for the model and are thus able to plot the entire efficient frontier. Our selection rule is very conservative. One of the features of the solution is that it does not explicitly involve the covariance of the asset returns.

Keywords: portfolio selection; risk averse measures; bicriteria piecewise linear program; efficient frontier; kuhn-tucker conditions (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (28)

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