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Updated: Dec 6, 2025

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Split Bregman iteration for multi-period mean variance portfolio optimization.

Stefania Corsaro1, Valentina De Simone2, Zelda Marino1

  • 1Dipartimento di Studi Aziendali e Quantitativi, Università di Napoli "Parthenope", Via Generale Parisi, 13, Napoli I-80133, Italy.

Applied Mathematics and Computation
|October 12, 2020
PubMed
Summary
This summary is machine-generated.

This study introduces a new investment strategy model that creates sparse portfolios with fewer transactions. It uses a fused lasso approach and the split Bregman method to optimize long-term wealth allocation and minimize losses upon early exit.

Keywords:
Fused lassoNonsmooth optimizationPortfolio selectionSplit Bregman

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Area of Science:

  • Quantitative Finance
  • Optimization Theory
  • Computational Economics

Background:

  • Optimal long-term investment strategy definition is crucial for wealth management.
  • Investors require flexibility to exit investments before maturity with minimal loss.
  • Multi-period portfolio rebalancing is a key challenge in financial planning.

Purpose of the Study:

  • To develop an optimal long-term investment strategy model.
  • To enable portfolio rebalancing across multiple periods and assets.
  • To incorporate early exit flexibility without significant financial penalty.

Main Methods:

  • A Markowitz-based model using a fused lasso approach.
  • Penalization of wealth and its variation using the l1 norm for sparse portfolios.
  • Solving a non-smooth constrained optimization problem via the split Bregman method.

Main Results:

  • The proposed model generates sparse portfolios with limited transactions.
  • The split Bregman method efficiently solves the complex optimization problem.
  • Numerical results demonstrate the model's effectiveness on real-world price data.

Conclusions:

  • The fused lasso approach effectively optimizes long-term investment strategies.
  • The split Bregman method provides an efficient solution for portfolio optimization.
  • The model offers a robust framework for multi-period investment planning with exit flexibility.