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Asian Review of Financial Research, Vol., No..
pp.990~1022
pp.990~1022
A Combination Rule for Portfolio Selection with Transaction Costs
Sangwon Suh chool of Economics, Chung-Ang University
We propose a new portfolio rule for a static portfolio selection problem in the presence of transaction costs. The new portfolio rule is formed by combining an extant portfolio rule with the no-rebalancing portfolio rule which speci?es the current portfolio weights before rebalancing as the desired portfolio weights. The new portfolio rule is easy to implement, not only becasue the combination weight is analytically derived, but also becasue the new rule can be applied into most extant portfolio rules. Simulation and out-of-sample evidences show that the new portfolio rule can greatly improve portfolio performance, compared to the extant portfolio rules to be combined.
Sangwon Suh
We propose a new portfolio rule for a static portfolio selection problem in the presence of transaction costs. The new portfolio rule is formed by combining an extant portfolio rule with the no-rebalancing portfolio rule which speci?es the current portfolio weights before rebalancing as the desired portfolio weights. The new portfolio rule is easy to implement, not only becasue the combination weight is analytically derived, but also becasue the new rule can be applied into most extant portfolio rules. Simulation and out-of-sample evidences show that the new portfolio rule can greatly improve portfolio performance, compared to the extant portfolio rules to be combined.