Empirical study of entropy optimization models with transaction costs in portfolio selection

Entropy can be as a measurement of the uncertainty and entropy optimization models can help investors to make decisions in the imperfect securities market. In this paper, the transaction costs will be added to the entropy optimization models including Mean-Entropy model and Mean-Cross-Entropy model, which make the models more rational and objective. The empirical study is done in twenty stocks of Shanghai A Share Stock Exchange to verify the feasibility and effectiveness of the two models.