Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/266244 
Year of Publication: 
2022
Series/Report no.: 
Working Paper No. 420
Publisher: 
University of Zurich, Department of Economics, Zurich
Abstract: 
Markowitz portfolio selection is a cornerstone in finance, both in academia and in the industry. Most academic studies either ignore transaction costs or account for them in a way that is both unrealistic and suboptimal by (i) assuming transaction costs to be constant across stocks and (ii) ignoring them at the portfolio-selection state and simply paying them 'after the fact'. Our paper proposes a method to fix both shortcomings.. As we show, if transaction costs are accounted for (properly) at the portfolio-selection stage, net performance in terms of the Sharpe ratio increases, particularly so for high-turnover strategies.
Subjects: 
Covariance matrix estimation
mean-variance efficiency
multivariate GARCH
portfolio selection
transaction costs
JEL: 
C13
G11
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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