Cost-aware Portfolios in a Large Universe of Assets

Statistical Seminar

Organizer：

吴宇楠

Speaker：

杨松山（中国人民大学）

Time：

Fri., 14:00-15:00, Oct. 31, 2025

Venue：

C548, Shuangqing Complex Building

Title:

Cost-aware Portfolios in a Large Universe of Assets

Abstract:

This paper proposes a finite-horizon mean-variance portfolio estimator, where the rebalancing decisions are made based on current information on asset returns and transaction costs. The study’s novelty is that the transaction costs are integrated within the decision process in a high-dimensional portfolio setting where the number of assets is larger than the sample size. We propose portfolio construction and rebalancing models with a nonconvex penalty considering two types of transaction cost, the proportional transaction cost and the quadratic transaction cost. We establish the desired theoretical properties of our estimator under mild regularity conditions. Monte Carlo simulations and empirical studies using S\&P 500 and Russell 2000 stocks show the satisfactory performance of the proposed portfolio and highlight the importance of involving the transaction costs when rebalancing a portfolio.