Uncertain portfolio selection model considering transaction costs and minimum transaction lots requirement

Issue title: Special Section: Best papers of the 2016 International Conference on Management and Operations Research - ICMOR 2016

Guest editors: Xiaoxia Huang, Qun Zhang and Qing Yang

Article type: Research Article

Authors: Zhang, Chao^a | Hu, Rui^{b; *} | Wei, Lirong^c

Affiliations: [a] School of Finance, Zhejiang University of Finance & Economics, HangZhou, China | [b] Beijing City University, Beijing, China | [c] Donglinks School of Economics and Management, University of Science and Technology Beijing, Beijing, China

Correspondence: [*] Corresponding author. Rui Hu, Beijing City University, Beijing 100083, China. E-mail: [email protected].

Abstract: Due to the complexity of real security market, sometimes the future security returns can only be valued based on experts’ estimations. Meanwhile, there are transaction costs and minimum transaction lots requirement in the real transaction process in the trading market. This paper discusses the portfolio selection problem in such a circumstance. Security returns are considered as uncertain variables, and a new mean-variance model with transaction costs and minimum transaction lots is established. In addition, the impact of minimum transaction lots requirement and transaction costs on optimal portfolio is discussed and a genetic algorithm for solving the optimization model is given. As an illustration, a numerical example is provided.

Keywords: Portfolio selection, mean-variance model, uncertain programing, genetic algorithm, uncertain variable

DOI: 10.3233/JIFS-169218

Journal: Journal of Intelligent & Fuzzy Systems, vol. 32, no. 6, pp. 4543-4554, 2017