TITLE:
Portfolio Optimization under Cardinality Constraints: A Comparative Study
AUTHORS:
Henri Claver Jimbo, Isidore Seraphin Ngongo, Nicolas Gabriel Andjiga, Takeru Suzuki, Charles Awona Onana
KEYWORDS:
Cardinality Constraints, Diversity, Portfolio Selection, Portfolio Reliability, Parametric Statistics
JOURNAL NAME:
Open Journal of Statistics,
Vol.7 No.4,
August
31,
2017
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.