Related papers: Maximum drawdown, recovery, and momentum
We hypothesize that portfolio sorts based on the V/P ratio generate excess returns and consist of companies that are undervalued for prolonged periods. Results, for the US market show that high V/P portfolios outperform low V/P portfolios…
With the improvement of computer performance and the development of GPU-accelerated technology, trading with machine learning algorithms has attracted the attention of many researchers and practitioners. In this research, we propose a novel…
In this work, we consider the optimal portfolio selection problem under hard constraints on trading volume amounts when the dynamics of the risky asset returns are governed by a discrete-time approximation of the Markov-modulated geometric…
This paper studies the stochastic modeling of market drawdown events and the fair valuation of insurance contracts based on drawdowns. We model the asset drawdown process as the current relative distance from the historical maximum of the…
Portfolio selection is the central task for assets management, but it turns out to be very challenging. Methods based on pattern matching, particularly the CORN-K algorithm, have achieved promising performance on several stock markets. A…
This paper studies a type of periodic utility maximization for portfolio management in an incomplete market model, where the underlying price diffusion process depends on some external stochastic factors. The portfolio performance is…
We design a portfolio construction framework and implement an active investment strategy utilizing momentum and trend-following signals across multiple asset classes and asset class risk factors. We quantify the performance of this strategy…
When it comes to stock returns, any form of predictability can bolster risk-adjusted profitability. We develop a collaborative machine learning algorithm that optimizes portfolio weights so that the resulting synthetic security is maximally…
This paper investigates performance attribution measures as a basis for constraining portfolio optimization. We employ optimizations that minimize expected tail loss and investigate both asset allocation (AA) and the selection effect (SE)…
A diversified risk-adjusted time-series momentum (TSMOM) portfolio can deliver substantial abnormal returns and offer some degree of tail risk protection during extreme market events. The performance of existing TSMOM strategies, however,…
In portfolio risk minimization, the inverse covariance matrix of returns is often unknown and has to be estimated in practice. This inverse covariance matrix also prescribes the hedge trades in which a stock is hedged by all the other…
We consider a multi-stock continuous time incomplete market model with random coefficients. We study the investment problem in the class of strategies which do not use direct observations of the appreciation rates of the stocks, but rather…
We consider the estimation of the multi-period optimal portfolio obtained by maximizing an exponential utility. Employing Jeffreys' non-informative prior and the conjugate informative prior, we derive stochastic representations for the…
On-line portfolio selection has attracted increasing interests in machine learning and AI communities recently. Empirical evidences show that stock's high and low prices are temporary and stock price relatives are likely to follow the mean…
Changes in market conditions present challenges for investors as they cause performance to deviate from the ranges predicted by long-term averages of means and covariances. The aim of conditional asset allocation strategies is to overcome…
The expanding number of assets offers more opportunities for investors but poses new challenges for modern portfolio management (PM). As a central plank of PM, portfolio selection by expected utility maximization (EUM) faces uncontrollable…
Portfolio managers are typically constrained by turnover limits, minimum and maximum stock positions, cardinality, a target market capitalization and sometimes the need to hew to a style (such as growth or value). In addition, portfolio…
The role of portfolio construction in the implementation of equity market neutral factors is often underestimated. Taking the classical momentum strategy as an example, we show that one can significantly improve the main strategy's features…
This paper presents how the most recent improvements made on covariance matrix estimation and model order selection can be applied to the portfolio optimisation problem. The particular case of the Maximum Variety Portfolio is treated but…
Mean-reverting behavior of individuals assets is widely known in financial markets. In fact, we can construct a portfolio that has mean-reverting behavior and use it in trading strategies to extract profits. In this paper, we show that we…