This paper focuses on the estimation of mutual fund styles by return-based style analysis. Usually, the investment style is assumed to be either constant through time, or time variation is implicitly accounted for by using rolling regressions. The former assumption is often contradicted by data...

A popular argument states that most of the diversification in a portfolio can be obtained with a rather small number of securities. In this paper we present three algorithms to approach the underlying NP-hard problem of portfolio optimization with a cardinality constraint. All three of these...

Nonlinear infinite horizon continuous time optimization problems are widely used in economics. However numerical solutions necessarily require reformulating the problem into a discrete finite approximation. The method proposed by Mercenier and Michel (1994) minimizes approximation error at...

Financial planning involves asset allocation and risk management. Asset allocation problem decides the percentage of the overall portfolio value allocated to each portfolio component. Risk management measures the risk of different investment instruments and creates or maintains portfolios with...

The purpose of the paper is to derive and illustrate a new suboptimal-consistent feedback solution for infinite-horizon linear-quadratic dynamic Stackelberg games which is in the same solution space as the infinite-horizon dynamic programming feedback solution, but which puts the leader in a...

In this paper we investigate the performance of the threshold accepting heuristic for the index tracking problem. The index tracking problem consists in minimizing the tracking error between a portfolio and a benchmark. The objective is to replicate the performance of a given index upon the...

This paper examines the issue of the generation of optimal control policies where there are explicit constraints upon the control values and there is limited knowledge of the complex economic system. The paper develops a methodology where the constrained optimal control is based upon a learning...

In this paper we study a capital accumulation model in an optimal control theoretic framework, where the capital stock and the investment rate are modeled as state variables and the change in the investment rate as control. Adjustment costs are introduced for both investment rate and the change...

Mathematically oriented microeconomic research has contributed enormously to the understanding of economic behavior and the functioning of markets and institutions. However, theoretical as well as applied microeconomic studies may be driven too much by mathematical feasibility. An illustrative...

A wealth of literature, reviewed in the first section of this paper, is concerned with the occurence of multiple equilibria in economic optimization models and with the resulting history dependence of optimal solutions. Typically, the existence of multiple equilibria is associated with market...