A popular argument states that most of the diversification in a portfolio can be obtained with a rather small number of securities. In this paper we present three algorithms to approach the underlying NP-hard problem of portfolio optimization with a cardinality constraint. All three of these...

This paper investigates the dynamics of capital structure of Japanese firms since the early 1990s to shed light on how far the reduction of excess leverage has progressed so far in Japan. Our main findings are as follows. First, the trade-off theory provides an appropriate framework to assess...