OPTIMAL PORTFOLIO SELECTION WITH UPPER BOUNDS FOR INDIVIDUAL SECURITIES*

ABSTRACT In this paper, we consider optimal portfolio selection with no short sales and with upper bounds for individual securities. The solution is reached by directy revising the optimal portfolio without upper bounds. Specifically, our analysis is based on the single‐index model, as well as the general multi‐index model that provides the return generating process for securities in the arbitrage pricing theory. As demonstrated in a simulation …