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Portfolio Optimization. Solver Constraint Issue

  1. #1
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    Question Portfolio Optimization. Solver Constraint Issue

    I'm doing a portfolio optimization problem. I have 24 stocks to choose from with their respective returns data. The stocks are grouped by industry and I have 8 industries.

    The constraint in the problem states that each industry can have no more than 22.5% of the entire investment in each industry (that part I have figured out). It also states that if an industry is chosen, it must be at least 5% of the total investment (this is the part I cant figure out). Disclaimer: Total investment must =1 or 100% and stocks or industries can have a zero value, they don't have to be used or chosen.

    How do I put the 5% constraint into solver since it only applies to those industries chosen? I'm familiar with binary constraints, but I still cant figure it out.

    Thanks for the help
    Last edited by spgoofyft; 03-23-2011 at 07:14 PM. Reason: Additional Info

  2. #2
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    Re: Portfolio Optimization. Solver Constraint Issue

    I should have included that the industries can have a zero value as well. So, not being chosen indicates that none of the stocks in that industry category were used in the optimal portfolio.

    Sorry about that

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