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On-line portfolio selection strategy with prediction in the presence of transaction costs

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Abstract.

An on-line portfolio selection strategy with transaction costs is presented. It ensures investors to achieve at least the same exponential growth rate of wealth as the best stock for a long term. This equipped with a new prediction method based on “cross rates” for price relative sequences yields a profitable algorithm, which has been tested on real data from the London Stock Exchange.

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Authors and Affiliations

  1. Universität Bonn, Institut für Angewandte Mathematik, Wegelerstr. 6, D-53115 Bonn, Germany (e-mail: albeverio@uni-bonn.de), , , , , , DE

    Sergio Albeverio

  2. School of Management, Fudan University, 200433 Shanghai, P.R. China, , , , , , CN

    LanJun Lao

  3. Institute of Mathematics, Fudan University, 200433 Shanghai, P.R. China (e-mail: xlzhao@fudan.edu.cn), , , , , , CN

    XueLei Zhao

Authors
  1. Sergio Albeverio
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  2. LanJun Lao
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  3. XueLei Zhao
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Manuscript received: October 2000/Final version received: April 2001

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Albeverio, S., Lao, L. & Zhao, X. On-line portfolio selection strategy with prediction in the presence of transaction costs. Mathematical Methods of OR 54, 133–161 (2001). https://doi.org/10.1007/s001860100142

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  • DOI: https://doi.org/10.1007/s001860100142

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