Nonnegative adaptive lasso for ultra-high dimensional regression models and a two-stage method applied in financial modeling

The constrained index tracking problem in the stock market without short sales is studied in the empirical part. A two-stage method, nonnegative adaptive lasso+nonnegative LS, is applied in the financial modeling. The tracking results indicate that nonnegative adaptive lasso and the two-stage method can both get small tracking error and is successful in assets selection.