Xiaoling Mei, Huanjun Zhu, Chongzhu Chen: Mean-variance portfolio selection with estimation risk and transaction costs

发表期刊：Applied Economics

发表时间：Published online: 21 Jul 2022

作者及单位：Xiaoling Mei^a, Huanjun Zhu^b, Chongzhu Chen^c

^a Department of Finance, School of Economics, Wang Yanan Institute for Studies in Economics, Xiamen, China;

^b Department of Statistics, School of Economics, Wang Yanan Institute for Studies in Economics, Xiamen, China;

^c ITG FUTURES CO., LTD, Xiamen, China

摘要：There are many approaches that have been proposed to improve the empirical performance of the Markowitz mean-variance model. Designed to mitigate the impact of parameter uncertainty and estimation error, these approaches have delivered substantially better out-of-sample performance. In this paper, we consider the portfolio optimization problem for a single-period investor facing different types of transaction costs. By reformulating the rebalancing problem into a linear regression framework, we show analytically that considering different transaction costs is equivalent to imposing additional constraints on the portfolio weights, thus providing desired properties such as sparsity and stability in the trading strategy.

关键词：Portfolio optimization; transaction costs; market impact; mean-variance analysis