The Pivoting Algorithm on the Portfolio Selection Model Maximizing the Utility
Peng Zhang · Cai-jing yanjiu · 2005
In this paper,considering the expected rate of the return of the portfolio and risk(variance),we propose a portfolio selection model maximizing the utility and solve it by the pivoting algorithm.The paper shows that risk preference coefficient with short sales can show the investor's preference within the whole region,but the coefficient without the short sales can just work within some regions.The investors should invest according to both their own preference and the expected rate of the return of the portfolio.We use program written by ourselves to calculate the effective portfolios with different risk preference coefficients,which could help investors to pinpoint the optimal portfolio.The algorithm solves the quadric programming problem without adding slack,remaining and artificial variables while its efficiency is very high and it operates very easily.