Related papers: Diversity-Weighted Portfolios with Negative Parame…
We consider the problem of optimizing a portfolio of financial assets, where the number of assets can be much larger than the number of observations. The optimal portfolio weights require estimating the inverse covariance matrix of excess…
It is well known that quantile regression model minimizes the portfolio extreme risk, whenever the attention is placed on the estimation of the response variable left quantiles. We show that, by considering the entire conditional…
This paper studies the continuous time mean-variance portfolio selection problem with one kind of non-linear wealth dynamics. To deal the expectation constraint, an auxiliary stochastic control problem is firstly solved by two new…
The conventional wisdom of mean-variance (MV) portfolio theory asserts that the nature of the relationship between risk and diversification is a decreasing asymptotic function, with the asymptote approximating the level of portfolio…
Portfolio optimization methods suffer from a catalogue of known problems, mainly due to the facts that pair correlations of asset returns are unstable, and that extremal risk measures such as maximum drawdown are difficult to predict due to…
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 consider the problem of portfolio selection within the classical Markowitz mean-variance framework, reformulated as a constrained least-squares regression problem. We propose to add to the objective function a penalty proportional to the…
Diversification is usually viewed as a reliable way to reduce risk, yet it can dramatically fail for heavy-tailed losses with infinite mean: pooling independent losses of this type may increase tail risk at every threshold. We study this…
A fractal approach to the long-short portfolio optimization is proposed. The algorithmic system based on the composition of market-neutral spreads into a single entity was considered. The core of the optimization scheme is a fractal walk…
We present the unified market-based description of returns and variances of the trades with shares of a particular security, of the trades with shares of all securities in the market, and of the trades with the market portfolio. We consider…
This paper studies a non-stochastic version of Fernholz's stochastic portfolio theory for a simple model of stock markets with continuous price paths. It establishes non-stochastic versions of the most basic results of stochastic portfolio…
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…
In the market place, diversification reduces risk and provides protection against extreme events by ensuring that one is not overly exposed to individual occurrences. We argue that diversification is best measured by characteristics of the…
We consider a group of mean-variance investors with mimicking desire such that each investor is willing to penalize deviations of his portfolio composition from compositions of other group members. Penalizing norm constraints are already…
The numeraire portfolio in a financial market is the unique positive wealth process that makes all other nonnegative wealth processes, when deflated by it, supermartingales. The numeraire portfolio depends on market characteristics, which…
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 paper investigates the large sample properties of the variance, weights, and risk of high-dimensional portfolios where the inverse of the covariance matrix of excess asset returns is estimated using a technique called nodewise…
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…
A market model in Stochastic Portfolio Theory is a finite system of strictly positive stochastic processes. Each process represents the capitalization of a certain stock. If at any time no stock dominates almost the entire market, which…
Diversification is the typical investment strategy of risk-averse agents. However, non-diversified positions that allocate all resources to a single asset, state of the world or revenue stream are common too. We show that whenever finitely…