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

Andrew Chen, Frank Fabozzi () and Dashan Huang ()

Review of Quantitative Finance and Accounting, 2012, vol. 39, issue 4, 509-526

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. Copyright Springer Science+Business Media, LLC 2012

Keywords: Portfolio revision; Transaction costs; Mean-variance; Conditional value-at-risk (CVaR); G11; C61 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (9)

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DOI: 10.1007/s11156-012-0292-1

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