Related papers: Diversification Return, Portfolio Rebalancing, and…
This paper proposes a portfolio construction framework designed to remain robust under estimation error, non-stationarity, and realistic trading constraints. The methodology combines dynamic asset eligibility, deterministic rebalancing, and…
This study is a detailed analysis of Speculation Game, a minimal agent-based model of financial markets, in which the round-trip trading and the dynamic wealth evolution with variable trading volumes are implemented. Instead of herding…
This paper presents several models addressing optimal portfolio choice, optimal portfolio liquidation, and optimal portfolio transition issues, in which the expected returns of risky assets are unknown. Our approach is based on a coupling…
How do you bring your assets as close as possible to your target allocation by only investing a fixed amount of additional funds, and not selling any assets? We look at two versions of this problem which have simple, closed form solutions…
The main contribution of the paper is to employ the financial market network as a useful tool to improve the portfolio selection process, where nodes indicate securities and edges capture the dependence structure of the system. Three…
In this paper, we consider the portfolio optimization problem in a financial market under a general utility function. Empirical results suggest that if a significant market fluctuation occurs, invested wealth tends to have a notable change…
This paper studies a robust portfolio optimization problem under the multi-factor volatility model introduced by Christoffersen et al. (2009). The optimal strategy is derived analytically under the worst-case scenario with or without…
Recent developments in deep learning techniques have motivated intensive research in machine learning-aided stock trading strategies. However, since the financial market has a highly non-stationary nature hindering the application of…
We investigate the variety of a portfolio of stocks in normal and extreme days of market activity. We show that the variety carries information about the market activity which is not present in the single-index model and we observe that the…
This study seeks to advance the understanding and prediction of stock market return uncertainty through the application of advanced deep learning techniques. We introduce a novel deep learning model that utilizes a Gaussian mixture…
We analyze a negative-parameter variant of the diversity-weighted portfolio studied by Fernholz, Karatzas, and Kardaras (Finance Stoch 9(1):1-27, 2005), which invests in each company a fraction of wealth inversely proportional to the…
Asset prices contain information about the probability distribution of future states and the stochastic discounting of those states as used by investors. To better understand the challenge in distinguishing investors' beliefs from…
Market timing is an investment technique that tries to continuously switch investment into assets forecast to have better returns. What is the likelihood of having a successful market timing strategy? With an emphasis on modeling…
This paper considers the mean-reverting portfolio design problem arising from statistical arbitrage in the financial markets. We first propose a general problem formulation aimed at finding a portfolio of underlying component assets by…
Portfolio optimization (PO) is a core tool in financial and operational decision-making, typically balancing expected profit and risk. In real-world applications, particularly in the energy sector, decision variables can be expressed as…
I demonstrate that with the market return determined by the equilibrium returns of the CAPM, expected returns of an asset are affected by the risks of all assets jointly. Another implication is that the range of feasible market returns will…
We describe how the market-based average and volatility of the "actual" return, which the investors gain within their market sales, depend on the statistical moments, volatilities, and correlations of the current and past market trade…
This paper studies the income fluctuation problem with capital income risk (i.e., dispersion in the rate of return to wealth). Wealth returns and labor earnings are allowed to be serially correlated and mutually dependent. Rewards can be…
Wealth inequality is an important matter for economic theory and policy. Ongoing debates have been discussing recent rise in wealth inequality in connection with recent development of active financial markets around the world. Existing…
We demonstrate by mathematical analysis and systematic computer simulations that redistribution can lead to sustainable growth in a society. The human capital dynamics of each agent is described by a stochastic multiplicative process which,…