RT Journal Article
SR 00
A1 Michalowski, W.
A1 Ogryczak, W.
T1 A recursive procedure for selecting optimal portfolio according to the MAD model
JF Control and Cybernetics
YR 1999
FD 1999
VO 28
IS 4
SP 725
OP 738
K1 Downside risk aversion; Linear programming; Portfolio optimization
AB The mathematical model of portfolio optimization is usually represented as a bicriteria optimization problem where a reasonable trade-off between expected rate of return and risk is sought. In a classical Markowitz model the risk is measured by a variance, thus resulting in a quadratic programming model. As an alternative, the MAD model was proposed where risk is measured by (mean) absolute deviation instead of a variance. The MAD model is computationally attractive, since it is transformed into an easy to solve linear programming program. In this paper we present a recursive procedure which allows to identify optimal portfolio of the MAD model depending on investor's downside risk aversion.
PB Systems Reseach Institute of the Polish Academy of Sciences
SN 0324-8569
LK https://pure.iiasa.ac.at/id/eprint/13569/
UL http://control.ibspan.waw.pl:3000/contents/show/80?year=1999