Abstract:Purpose
Transaction cost becomes significant when one holds many securities in a large portfolio where capital allocations are frequently rebalanced due to variations in non-stationary statistical characteristics of the asset returns. The purpose of this paper is to employ a sparsing method to sparse the eigenportfolios, so that the transaction cost can be reduced and without any loss of its performance.
Design/methodology/approach
In this paper, the authors have designed pdf-optimized mid-tread Lloyd-Max qu… Show more
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