Portfolio construction on the Athens Stock Exchange: a multiobjective optimization approach

Abstract

In this research article, our purpose is to propose a single-period multiobjective mixed-integer programming model for equity portfolio construction, in order to generate the Pareto optimal portfolios, using a variant of the well-known ε-constraint method. The decision maker's investment policy, i.e. constraints regarding the portfolio structure, is strongly taken into account. An illustrative application in the Athens Stock Exchange market is also presented.

Keywords:

• portfolio construction
• multiobjective mathematical programming
• equities

Acknowledgements

We would like to express our thanks to the two anonymous referees, whose review directions on an earlier version of the article were a determinant factor for the improvement of its quality. We would also like to express our thanks to Professor Constantin Zopounidis and Assistant Professor Michael Doumpos of Technical University of Crete for their valuable comments.