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Fifty years of portfolio optimization

Author

Listed:
  • Salo, Ahti
  • Doumpos, Michalis
  • Liesiö, Juuso
  • Zopounidis, Constantin

Abstract

The allocation of resources to alternative investment opportunities is one of the most important decisions organizations and individuals face. These decisions can be guided by building and solving portfolio optimization models that capture the salient aspects of the investment problem, including decision-makers’ preferences, multiple objectives, and decision opportunities over the planning horizon. In this paper, we give a historically grounded overview of portfolio optimization which, as a field within operational research with roots in finance, is vast thanks to many decades of research and the huge diversity of problems that have been tackled. In particular, we provide a unified and therefore unique treatment that covers the full breadth of portfolio optimization problems, including, for instance, the allocation of resources to financial assets and the selection of indivisible assets such as R&D projects. We also identify opportunities for future methodological and applied research, hoping to inspire researchers to contribute to the growing field of portfolio optimization.

Suggested Citation

  • Salo, Ahti & Doumpos, Michalis & Liesiö, Juuso & Zopounidis, Constantin, 2024. "Fifty years of portfolio optimization," European Journal of Operational Research, Elsevier, vol. 318(1), pages 1-18.
    • Handle: RePEc:eee:ejores:v:318:y:2024:i:1:p:1-18
    DOI: 10.1016/j.ejor.2023.12.031
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    Citations

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    Cited by:

    1. Ronald Ravinesh Kumar & Hossein Ghanbari & Peter Josef Stauvermann, 2024. "Application of a Robust Maximum Diversified Portfolio to a Small Economy’s Stock Market: An Application to Fiji’s South Pacific Stock Exchange," JRFM, MDPI, vol. 17(9), pages 1-30, September.
    2. Diana Barro & Antonella Basso & Stefania Funari & Guglielmo Alessandro Visentin, 2024. "The Effects of the Introduction of Volume-Based Liquidity Constraints in Portfolio Optimization with Alternative Investments," Mathematics, MDPI, vol. 12(15), pages 1-26, August.

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