Abstract
The purpose of this paper is to propose a practical branch and bound algorithm for solving a class of long-short portfolio optimization problem with concave and d.c. transaction cost and complementarity conditions on the variables.
We will show that this algorithm can solve a problem of practical size and that the long-short strategy leads to a portfolio with significantly better risk-return structure compared with standard purchase only portfolio both in terms of ex-ante and ex-post performance.
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Konno, H., Akishino, K. & Yamamoto, R. Optimization of a Long-Short Portfolio under Nonconvex Transaction Cost. Comput Optim Applic 32, 115–132 (2005). https://doi.org/10.1007/s10589-005-2056-5
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DOI: https://doi.org/10.1007/s10589-005-2056-5