New algorithm reveals optimal investment strategy in volatile markets with costs.
The article discusses how to optimize investment portfolios when transaction costs are involved. In a market with no friction, it's best to keep a constant proportion of wealth in risky assets. But with transaction costs, the optimal strategy changes. The researchers developed an algorithm to identify different transaction cost regions, where investors should buy, sell, or hold based on their current position. This algorithm helps investors make better decisions in the face of transaction costs.