Portfolio Optimization under Cardinality Constraints: A Comparative Study - Open Journal of Statistics

OJS > Vol.7 No.4, August 2017

Portfolio Optimization under Cardinality Constraints: A Comparative Study ()

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DOI: 10.4236/ojs.2017.74051 2,200 Downloads 4,965 Views Citations

Author(s)

Henri Claver Jimbo^1*, Isidore Seraphin Ngongo^2,3, Nicolas Gabriel Andjiga³, Takeru Suzuki¹, Charles Awona Onana³

Affiliation(s)

¹Department of Applied Mathematics and Statistics, Laboratory of Big Data and Stochasticity, Waseda University, Tokyo, Japan.
²Department of Applied Mathematics, Laboratory SAMM (Statistics Analysis and Multidisciplinary Modeling), University of Paris 1, Pantheon Sorbonne, Paris, France.
³Department of Mathematics, Faculty of Science, University of Yaounde 1-ENS-Higher Training College, Yaounde, Cameroon.

ABSTRACT

The Cardinality Constraint-Based Optimization problem is investigated in this note. In portfolio optimization problem, the cardinality constraint allows one to invest in assets out of a universe of N assets for a prespecified value of K. It is generally agreed that choosing a “small” value of K forces the implementation of diversification in small portfolios. However, the question of how small must be K has remained unanswered. In the present work, using a comparative approach we show computationally that optimal portfolio selection with a relatively small or large number of assets, K, may produce similar results with differentiated reliabilities.

KEYWORDS

Cardinality Constraints, Diversity, Portfolio Selection, Portfolio Reliability, Parametric Statistics

Share and Cite:

Jimbo, H. , Ngongo, I. , Andjiga, N. , Suzuki, T. and Onana, C. (2017) Portfolio Optimization under Cardinality Constraints: A Comparative Study. Open Journal of Statistics, 7, 731-742. doi: 10.4236/ojs.2017.74051.

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