Abstract
Transaction costs can be classified into several factors, such as liquidity and timing. Commission fee is of particular importance, because transaction cost affects investor's return directly. But there are few papers dealing with transaction costs, because of its difficulty in solving associated optimization problems. In this paper we propose a portfolio optimization model to manage transaction costs using integer programming. Our model can deal with concave commission fee in Japan. Applying our model to Tokyo Stock Exchange 1st Section, we obtained some knowledge about their effects on the resulting portfolios.
