Portfolio optimization under transfer coefficient constraint

Rei Yamamoto, Takuya Ishibashi and Hiroshi Konno
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Rei Yamamoto: Mitsubishi UFJ Trust Investment Technology Institute Co., Ltd. 2–6

Journal of Asset Management, 2012, vol. 13, issue 1, No 5, 57 pages

Abstract: Abstract This article is concerned with a portfolio optimization problem subject to a transfer coefficient constraint, which is intended to generate an enhanced index portfolio with a good ex-post performance. We will show that a standard mean-tracking error model with transfer coefficient constraint can be formulated as a convex minimization problem, which can be solved by a standard optimization software. Also we will show that the transfer coefficient constraint plays an essential role for constructing an enhanced index fund with a good ex-post performance using real stock data in Tokyo Stock Exchange.

Keywords: portfolio optimization; transfer coefficient; enhanced index fund; fundamental law of active management; convex programming (search for similar items in EconPapers)
Date: 2012
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DOI: 10.1057/jam.2011.13

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