Sparse Mean-Variance Portfolio Selection under Ellipsoidal Uncertainty

We investigate mean–variance portfolio selection with an $\ell_0$-penalty to promote sparsity in asset allocations. Uncertainty in the mean return vector is incorporated through an ellipsoidal uncertainty set, yielding a robust sparse optimization framework. We characterize the structure of both local and global minimizers and exploit these properties in the risk minimization and return maximization formulations. Building on this structural insight, we develop a branch-and-bound algorithm tailored to the resulting robust sparse portfolio problems, together with a new pruning rule that discards exponentially many candidate portfolios in a single step. Extensive computational experiments on real market data, together with comparisons against a mixed-integer second-order cone programming solver, demonstrate the effectiveness and competitiveness of the proposed approach.