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 method 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 active weights.Comment: 16 pages, 3 figures, 2 tables, 1 pseudocod