A Note on CCMV Portfolio Optimization Model with Short Selling and Risk-neutral Interest Rate

Tahereh Khodamoradi; Maziar Salahi; Ali Reza Najafi

doi:10.19139/soic-2310-5070-890

Tahereh Khodamoradi
Maziar Salahi University of Guilan
Ali Reza Najafi

DOI: https://doi.org/10.19139/soic-2310-5070-890

Keywords: CCMV model; Short selling; Risk-neutral interest rate; Quadratic optimization

Abstract

In this paper, first we present some drawbacks of the cardinality constrained mean-variance (CCMV) portfolio optimization with short selling and risk-neutral interest rate when the lower and upper bounds of the assets contributions are -1/K and 1/K(K denotes the number of assets in portfolio). Then, we present an improved variant using absolute returns instead of the returns to include short selling in the model. Finally, some numerical results are provided using the data set of the S&P 500 index, Information Technology, and the MIBTEL index in terms of returns and Sharpe ratios to compare the proposed models with those in the literature.

Author Biography

Maziar Salahi, University of Guilan

Professor, Department of Applied Math, University of Guilan, Rasht, Iran

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