Title page for E-project-042707-112035

Project Type MQP

Submission date 2007-04-27

Authors
Jessica M Clark, MA
Sean E Mulready, MA

URN E-project-042707-112035

Title Portfolio Optimization with Transaction Costs

Advisor
Heinricher, Arthur C, MA

Availability unrestricted

Abstract
Investors often update their portfolios at regular time intervals by trading stocks, but there are costs associated with these trades. This project seeks to limit these transaction costs by controlling the portfolio turnover (absolute change as a fraction of book size) between time periods. The result is a multiperiod
optimization problem with quadratic objective function and non-smooth constraints. The resulting portfolios outperformed benchmark portfolios in both expected utility and actual portfolio value.

Files
TurnoverConstraintsMQP.pdf

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Project Type	MQP
Submission date	2007-04-27
Authors	Jessica M Clark, MA Sean E Mulready, MA
URN	E-project-042707-112035
Title	Portfolio Optimization with Transaction Costs
Advisor	Heinricher, Arthur C, MA
Availability	unrestricted
Abstract Investors often update their portfolios at regular time intervals by trading stocks, but there are costs associated with these trades. This project seeks to limit these transaction costs by controlling the portfolio turnover (absolute change as a fraction of book size) between time periods. The result is a multiperiod optimization problem with quadratic objective function and non-smooth constraints. The resulting portfolios outperformed benchmark portfolios in both expected utility and actual portfolio value.
Files	TurnoverConstraintsMQP.pdf