Related papers: Mean--variance portfolio optimization when means a…
We study the design of portfolios under a minimum risk criterion. The performance of the optimized portfolio relies on the accuracy of the estimated covariance matrix of the portfolio asset returns. For large portfolios, the number of…
It is well known that there are asymmetric dependence structures between financial returns. In this paper we use a new nonparametric measure of local dependence, the local Gaussian correlation, to improve portfolio allocation. We extend the…
We investigate and extend the result that an alpha-weight angle from unconstrained quadratic portfolio optimisations has an upper bound dependent on the condition number of the covariance matrix. This is known to imply that better…
We derive new results related to the portfolio choice problem for power and logarithmic utilities. Assuming that the portfolio returns follow an approximate log-normal distribution, the closed-form expressions of the optimal portfolio…
The portfolio optimization problem in which the variances of the return rates of assets are not identical is analyzed in this paper using the methodology of statistical mechanical informatics, specifically, replica analysis. We define two…
In recent years, the evaluation of the minimal investment risk of the quenched disordered system of a portfolio optimization problem and the investment concentration of the optimal portfolio has been actively investigated using the analysis…
We provide analytical results for a static portfolio optimization problem with two coherent risk measures. The use of two risk measures is motivated by joint decision-making for portfolio selection where the risk perception of the portfolio…
Motivated by practical applications, we explore the constrained multi-period mean-variance portfolio selection problem within a market characterized by a dynamic factor model. This model captures predictability in asset returns driven by…
Robust estimation for modern portfolio selection on a large set of assets becomes more important due to large deviation of empirical inference on big data. We propose a distributionally robust methodology for high-dimensional mean-variance…
Managing investment portfolios is an old and well know problem in multiple fields including financial mathematics and financial engineering as well as econometrics and econophysics. Multiple different concepts and theories were used so far…
We consider classical Merton problem of terminal wealth maximization in finite horizon. We assume that the drift of the stock is following Ornstein-Uhlenbeck process and the volatility of it is following GARCH(1) process. In particular,…
One of the reasons that higher order moment portfolio optimization methods are not fully used by practitioners in investment decisions is the complexity that these higher moments create by making the optimization problem nonconvex. Many few…
This paper studies a variation of the continuous-time mean-variance portfolio selection where a tracking-error penalization is added to the mean-variance criterion. The tracking error term penalizes the distance between the allocation…
Value-at-Risk is one of the most popular risk management tools in the financial industry. Over the past 20 years several attempts to include VaR in the portfolio selection process have been proposed. However, using VaR as a risk measure in…
Mean-variance portfolio decisions that combine prediction and optimisation have been shown to have poor empirical performance. Here, we consider the performance of various shrinkage methods by their efficient frontiers under different…
We study the optimal asset allocation problem for a fund manager whose compensation depends on the performance of her portfolio with respect to a benchmark. The objective of the manager is to maximise the expected utility of her final…
We consider the problem of managing a portfolio of moving-band statistical arbitrages (MBSAs), inspired by the Markowitz optimization framework. We show how to manage a dynamic basket of MBSAs, and illustrate the method on recent historical…
The concept of Diversification Return (DR) was introduced by Booth and Fama in 1990s and it has been well studied in the finance literature mainly focusing on the various sources it may be generated. However, unlike the classical…
According to recent findings [1,2], empirical covariance matrices deduced from financial return series contain such a high amount of noise that, apart from a few large eigenvalues and the corresponding eigenvectors, their structure can…
The vector of periodic, compound returns of a typical investment portfolio is almost never a convex combination of the return vectors of the securities in the portfolio. As a result the ex post version of Harry Markowitz's "standard…