Related papers: Risk reduction and Diversification within Markowit…
Modern portfolio theory has provided for decades the main framework for optimizing portfolios. Because of its sensitivity to small changes in input parameters, especially expected returns, the mean-variance framework proposed by Markowitz…
This paper studies a continuous-time market where an agent, having specified an investment horizon and a targeted terminal mean return, seeks to minimize the variance of the return. The optimal portfolio of such a problem is called…
In the paper, we consider three quadratic optimization problems which are frequently applied in portfolio theory, i.e, the Markowitz mean-variance problem as well as the problems based on the mean-variance utility function and the quadratic…
We consider how to optimally allocate investments in a portfolio of competing technologies using the standard mean-variance framework of portfolio theory. We assume that technologies follow the empirically observed relationship known as…
This paper is devoted to study the optimal portfolio problem. Harry Markowitz's Ph.D. thesis prepared the ground for the mathematical theory of finance. In modern portfolio theory, we typically find asset returns that are modeled by a…
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 monotone mean-variance (MMV) preference proposed by Maccheroni, et al. (Math. Finance 19(3): 487-521, 2009) fails to differentiate strictly dominant payoffs, which may cause inconsistency in portfolio decision-making. This paper…
This paper studies the mean-variance optimal portfolio choice of an investor pre-committed to a deterministic investment policy in continuous time in a market with mean-reversion in the risk-free rate and the equity risk-premium. In the…
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…
Portfolio diversification, traditionally measured through asset correlations and volatilitybased metrics, is fundamental to managing financial risk. However, existing diversification metrics often overlook non-numerical relationships…
Volatility is the canonical measure of financial risk, a role largely inherited from Modern Portfolio Theory. Yet, its universality rests on restrictive efficiency assumptions that render volatility, at best, an incomplete proxy for true…
The optimization of large portfolios displays an inherent instability to estimation error. This poses a fundamental problem, because solutions that are not stable under sample fluctuations may look optimal for a given sample, but are, in…
A new framework for portfolio diversification is introduced which goes beyond the classical mean-variance approach and portfolio allocation strategies such as risk parity. It is based on a novel concept called portfolio dimensionality that…
We use the martingale method to discuss the relationship between mean-variance (MV) and monotone mean-variance (MMV) portfolio selections. We propose a unified framework to discuss the relationship in general financial markets without any…
Motivated by empirical evidence for rough volatility models, this paper investigates continuous-time mean-variance (MV) portfolio selection under the Volterra Heston model. Due to the non-Markovian and non-semimartingale nature of the…
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…
We propose a definition of diversification as a binary relationship between financial portfolios. According to it, a convex linear combination of several risk positions with some weights is considered to be less risky than the probabilistic…
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 extend the classical mean-variance (MV) framework and propose a robust and sparse portfolio selection model incorporating an ellipsoidal uncertainty set to reduce the impact of estimation errors and fixed transaction costs to penalize…
This paper studies the multi-period mean-variance portfolio allocation problem with transaction costs. Many methods have been proposed these last years to challenge the famous uni-period Markowitz strategy.But these methods cannot integrate…