Year: 2015
Type: article
Abstract: The typical behavior of optimal solutions to portfolio optimization problems with absolute deviation and expected shortfall models using replica analysis was pioneeringly estimated by S. Ciliberti et al. [Eur. Phys. B. 57, 175 (2007)]; however, they have not yet developed an approximate derivation method for finding the optimal portfolio with respect to a given return set. In this study, an approximation algorithm based on belief propagation for the portfolio optimization problem is presented using the Bethe free energy formalism, and the consistency of the numerical experimental results of the proposed algorithm with those of replica analysis is confirmed. Furthermore, the conjecture of H. Konno and H. Yamazaki, that the optimal solutions with the absolute deviation model and with the mean-variance model have the same typical behavior, is verified using replica analysis and the belief propagation algorithm.
Source: PLoS ONE
Authors: Takashi Shinzato, Muneki Yasuda
Institutions: Hitotsubashi University, Yamagata University
Language: English
Field: Decision Sciences
Domain: Social Sciences
Open Access status: gold
Estimated APC paid: $2,382
OpenAlex ID: W1813928882