On the Diversity Constraints for Portfolio Optimization

Entropy

关键词: portfolio optimization;    diversity constraint;    norm;    entropy;   

DOI  :  10.3390/e15114607

来源: mdpi

【 摘 要 】

In the literature, Markowitz’s mean-variance model and its variants have been shown to yield portfolios that put excessive weights on only a few assets. Many diversity constraints were proposed and added to these models to avoid such overly concentrated portfolios. However, since these diversity constraints are formulated differently, it becomes difficult to compare them and study their relationships. This paper proposes a canonical form for the commonly used diversity constraints in the literature, and shows how to transform these diversity constraints into this canonical form. Furthermore, this paper compares these diversity constraints (in the canonical form with the same upper bound) on their ability to shrink the feasible region of the portfolio optimization problem. The results show a subset relation among their feasible regions.

【 授权许可】

CC BY   
© 2013 by the authors; licensee Molecular Diversity Preservation International, Basel, Switzerland.