A Reference Point Approach to Bi-Objective Dynamic Portfolio Optimization

Bartosz Sawik

Abstract


The portfolio selection problem presented in this paper is formulated as a biobjective mixed integer program. The portfolio selection problem considered is based on a dynamic model of investment, in which the investor buys and sells securities in successive investment periods. The problem objective is to dynamically allocate the wealth on different securities to optimize by reference point method the portfolio expected return and the probability that the return is not less than a required level. In computational experiments the dataset of daily quotations from the Warsaw Stock Exchange were used.


Keywords


Dynamic Portfolio; Mixed Integer Programming; Reference Point Method; Bi-Objective Optimization; Value-at-Risk

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DOI: https://doi.org/10.7494/dmms.2009.3.2.73

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