Osorio, Maria A., Gulpinar, Nalan and Rustem, Berc. (2008) A mixed integer programming model for multistage mean-variance post-tax optimization. European Journal of Operational Research, Vol.185 (No.2). pp. 451-480. ISSN 0377-2217

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Abstract

In this paper, we introduce a mixed integer stochastic programming approach to mean-variance post-tax portfolio management. This approach takes into account of risk in a multistage setting and allows general withdrawals from original capital. The uncertainty on asset returns is specified as a scenario tree. The risk across scenarios is addressed using the probabilistic approach of classical stochastic programming. The tax rules are used with stochastic linear and mixed integer quadratic programming models to compute an overall tax and return-risk efficient multistage portfolio. The incorporation of the risk term in the model provides robustness and leads to diversification over wrappers and assets within each wrapper. General withdrawals and risk aversion have an impact on the distribution of assets among wrappers. Computational results are presented using a study with different scenario trees in order to show the performance of these models. (C) 2007 Elsevier B.V. All rights reserved.

Item Type:	Journal Article
Subjects:	H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Divisions:	Faculty of Social Sciences > Warwick Business School
Journal or Publication Title:	European Journal of Operational Research
Publisher:	Elsevier Science BV
ISSN:	0377-2217
Date:	1 March 2008
Volume:	Vol.185
Number:	No.2
Number of Pages:	30
Page Range:	pp. 451-480
Identification Number:	10.1016/j.ejor.2006.09.105
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access
URI:	http://wrap.warwick.ac.uk/id/eprint/31202

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