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Applied Mathematics and Computation
Volume 171, Issue 1, 1 December 2005, Pages 567-572
 
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doi:10.1016/j.amc.2005.01.072    How to Cite or Link Using DOI (Opens New Window)
Copyright © 2005 Elsevier Inc. All rights reserved.

A modified goal programming approach for the mean-absolute deviation portfolio optimization model

Ching-Ter ChangE-mail The Corresponding Author

Information management, National Changhua University of Education, Paisa Village, Changhua 50058, Taiwan, ROC

Available online 3 March 2005.

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Abstract

The purpose of this paper is to present a reformulation of the model presented by Feinstein and Thapa [C.D. Feinstein, M.N. Thapa, Notes: a reformulation of a mean-absolute deviation portfolio optimization model, Management Science 39 (12) (1993) 1552–1553]. The approach of Feinstein and Thapa has been accepted as the most efficient technique published, requiring the least number of auxiliary constraints and additional continuous variables. To solve a portfolio optimization problem with T periods, in their method would introduce T + 2 auxiliary constraints, 2T auxiliary sign constraints, and 2T additional continuous variables. This note indicates that it is still possible to reduce the number of auxiliary constraints and additional continuous variables in the model of Feinstein and Thapa. The equivalent concise model is proposed in this note, which has T + 2 auxiliary constraints, T auxiliary sign constraints, and T additional continuous variables.

Keywords: Portfolio; Goal programming

Article Outline

1. Introduction
2. Modification of Feinstein and Thapa’s model
3. Computational experience
References

 
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