%A W. Michalowski
%A W. Ogryczak
%J Control and Cybernetics
%T A recursive procedure for selecting optimal portfolio according to the MAD model
%X 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.
%N 4
%K Downside risk aversion; Linear programming; Portfolio optimization
%P 725-738
%V 28
%D 1999
%I Systems Reseach Institute of the Polish Academy of Sciences
%L iiasa13569