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| Renato Bruni, Francesco Cesarone, Andrea Scozzari and Fabio Tardella |
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| ''No arbitrage and a linear portfolio selection model'' |
| ( 2013, Vol. 33 No.2 ) |
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| We propose a linear bi-objective optimization approach to the problem of finding a portfolio that maximizes average excess return with respect to a benchmark index while minimizing underperformance over a learning period. We establish some theoretical results linking classical No Arbitrage conditions to the existence of a feasible portfolio for our model that strictly outperforms the index.
Empirical analyses on publicly available real-world financial datasets show the effectiveness of the model and confirm the described theoretical results. |
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| Keywords: Enhanced Index Tracking, Asset Management, Portfolio Selection, No Arbitrage, Linear Programming |
JEL: C6 - Mathematical Methods and Programming: General
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| Manuscript Received : Mar 20 2013 | | Manuscript Accepted : May 21 2013 |
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