Portfolio Selection by Maximizing Various Risk-Adjusted Return Ratios via Convex Reformulations

In this article, the classic portfolio selection problem is reformulated as nine convex optimization problems to maximize nine risk-adjusted performance indexes based on nine different risk measures in Markowitz's return-risk framework. The exact convex reformulations facilitate a decision maker to optimize portfolios efficiently by maximizing one of the nine risk-adjusted performance criteria using widely available convex optimization problem solvers, without compromising the portfolio optimality. The superior performances of the proposed approaches to the state-of-the-art methods, in terms of out-of-sample risk-adjusted returns, annualized returns, and portfolio sparsity, are demonstrated through extensive experimentation on 13 datasets from major world stock markets.

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Publication Details

Journal
IEEE Transactions on Computational Social Systems
Published
2024-12-27
DOI
https://doi.org/10.1109/tcss.2024.3507927
Primary Topic
Risk and Portfolio Optimization
Type
article
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article

Portfolio Selection by Maximizing Various Risk-Adjusted Return Ratios via Convex Reformulations

Jun Wang, Wei Zhang, Fangyu Zhang
IEEE Transactions on Computational Social Systems
Risk and Portfolio Optimization
article

Portfolio Selection by Maximizing Various Risk-Adjusted Return Ratios via Convex Reformulations

Jun Wang, Wei Zhang, Fangyu Zhang
article en

Abstract

In this article, the classic portfolio selection problem is reformulated as nine convex optimization problems to maximize nine risk-adjusted performance indexes based on nine different risk measures in Markowitz's return-risk framework. The exact convex reformulations facilitate a decision maker to optimize portfolios efficiently by maximizing one of the nine risk-adjusted performance criteria using widely available convex optimization problem solvers, without compromising the portfolio optimality. The superior performances of the proposed approaches to the state-of-the-art methods, in terms of out-of-sample risk-adjusted returns, annualized returns, and portfolio sparsity, are demonstrated through extensive experimentation on 13 datasets from major world stock markets.

IEEE Transactions on Computational Social SystemsVol. 12(3)
City University of Hong Kong (HK), Chongqing University of Technology (CN)
Openalex Percentile: Top 70%
Risk and Portfolio Optimization
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