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Contribution Details
| Type | Working Paper |
| Scope | Discipline-based scholarship |
| Title | Markowitz portfolios under transaction costs |
| Organization Unit | |
| Authors |
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| Language |
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| Institution | University of Zurich |
| Series Name | Working paper series / Department of Economics |
| Number | 420 |
| ISSN | 1664-7041 |
| Number of Pages | 22 |
| Date | 2024 |
| Abstract Text | Markowitz portfolio selection is a cornerstone in finance, in academia as well as in the industry. Most academic studies either ignore transaction costs or account for them in a way that is both unrealistic and suboptimal by (i) assuming transaction costs to be constant across stocks and (ii) ignoring them at the portfolio-selection state and simply paying them `after the fact'. Our paper proposes a method to fix both shortcomings.. As we show, if transaction costs are accounted for (properly) at the portfolio-selection stage, net performance in terms of the Sharpe ratio often increases, in particular for high-turnover strategies. |
| Other Identification Number | merlin-id:22866 |
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| Keywords | Covariance matrix estimation, mean-variance efficiency, multivariate GARCH, portfolio selection, transaction costs |
| Additional Information | Revised version |