Sparse Non-Convex Optimization For Higher Moment Portfolio Management

TL;DR

This paper introduces a novel approach using successive convex approximation to address the nonconvex optimization problem in higher moment portfolio management, making it more practical for investment decisions.

Contribution

It applies successive convex approximation to the mean-variance-skewness problem, providing a new method for higher moment portfolio optimization.

Findings

Demonstrates the effectiveness of the proposed method

Addresses the complexity of nonconvex optimization in finance

Provides a practical solution for higher moment portfolio management

Abstract

One of the reasons that higher order moment portfolio optimization methods are not fully used by practitioners in investment decisions is the complexity that these higher moments create by making the optimization problem nonconvex. Many few methods and theoretical results exists in the literature, but the present paper uses the method of successive convex approximation for the mean-variance-skewness problem.