Portfolio Revision under Mean-Variance and Mean-CVaR with Transaction Costs
The portfolio revision process usually begins with a portfolio of assets rather than cash. As a result, some assets must be liquidated to permit investment in other assets, incurring transaction costs that should be directly integrated into the portfolio optimization problem. This paper discusses and analyzes the impact of transaction costs on the optimal portfolio under mean-variance and mean-conditional value-at-risk strategies. In addition, we present some analytical solutions and empirical evidence for some special situations to understand the impact of transaction costs on the portfolio revision process.
Portfolio revision, Transaction costs, Mean-variance, Conditional value-at-risk (CVaR)
Finance and Financial Management | Portfolio and Security Analysis
Review of Quantitative Finance and Accounting
Springer Verlag (Germany)
CHEN, Andrew; FABOZZI, Frank; and Dashan HUANG.
Portfolio Revision under Mean-Variance and Mean-CVaR with Transaction Costs. (2012). Review of Quantitative Finance and Accounting. 39, (4), 509-526. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/4785