Local Search for Constrained Financial Portfolio Selection Problems with Short Sellings
The Portfolio Selection Problem  is amongst the most studied issues in finance. In this problem, given a universe of assets (shares, options, bonds, . . . ), we are concerned in finding out a portfolio (i.e., which asset to invest in and by how much) which minimizes the risk while ensuring a given minimum return. In the most common formulation it is required that all the asset shares have to be non-negative. Even though this requirement is a common assumption behind theoretical approaches, it is not enforced in real-markets, where the presence of short positions (i.e., assets with negative shares corresponding to speculations on falling prices) is intertwined to long positions (i.e., assets with positive shares).
KeywordsPortfolio Selection Short Sellings Short Position Portfolio Selection Problem Steep Descent
Unable to display preview. Download preview PDF.
- 3.Di Gaspero, L., Di Tollo, G., Roli, A., Schaerf, A.: Hybrid metaheuristics for constrained portfolio selection problem. Quantitative Finance (2010) ISSN 1469-7688 (published online), doi:10.1080/14697680903460168Google Scholar
- 4.Shannon, E., Johnson, G., Vikram, S.: An empirical analysis of 130/30 strategies: Domestic and international 130/30 strategies add value over long-only strategies. The Journal of Alternative Investments (2007)Google Scholar
- 5.Gilli, M., Schumann, E., di Tollo, G., Cabej, G.: Constructing long-short portfolios with the omega ratio. Technical Report 08-34, Swiss Finance Institute (2008)Google Scholar
- 7.Markowitz, H.: Portfolio selection. Journal of Finance 7(1), 77–91 (1952)Google Scholar