Fifty years of portfolio optimization

Ahti Salo*, Michalis Doumpos, Juuso Liesiö, Constantin Zopounidis

*Corresponding author for this work

Research output: Contribution to journalReview Articlepeer-review

Abstract

The allocation of resources to alternative investment opportunities is one of the most important decisions organizations and individuals face. These decisions can be guided by building and solving portfolio optimization models that capture the salient aspects of the investment problem, including decision-makers’ preferences, multiple objectives, and decision opportunities over the planning horizon. In this paper, we give a historically grounded overview of portfolio optimization which, as a field within operational research with roots in finance, is vast thanks to many decades of research and the huge diversity of problems that have been tackled. In particular, we provide a unified and therefore unique treatment that covers the full breadth of portfolio optimization problems, including, for instance, the allocation of resources to financial assets and the selection of indivisible assets such as R&D projects. We also identify opportunities for future methodological and applied research, hoping to inspire researchers to contribute to the growing field of portfolio optimization.

Original languageEnglish
Number of pages18
JournalEuropean Journal of Operational Research
DOIs
Publication statusE-pub ahead of print - 29 Dec 2023
MoE publication typeA2 Review article, Literature review, Systematic review

Keywords

  • Multiattribute value/utility theory
  • Multicriteria decision aiding
  • Portfolio decision analysis
  • Portfolio optimization
  • Resource allocation

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