Using Column Generation to Solve Extensions to the Markowitz Model. (arXiv:1812.00093v1 [math.OC])

We introduce a solution scheme for portfolio optimization problems with cardinality constraints. Typical portfolio optimization problems are extensions of the classical Markowitz mean-variance portfolio optimization model. We solve such type of problems using a scheme similar to column generation. In this scheme, the original problem is restricted to a subset of the assets resulting in a master convex quadratic problem. Then the dual information of the master problem is used in a sub-problem to propose more assets to consider. We also consider other extensions to the Markowitz model to diversify the portfolio selection within the given intervals for the active weights.