Related papers: Sharpe portfolio using a cross-efficiency evaluati…

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…

This paper explores option portfolio optimization when the underlying returns are skew-elliptical t-distributed. We use the variance and value at risk (VaR) to measure portfolio risk. The novelty of our work is the departure from the…

We employ model predictive control for a multi-period portfolio optimization problem. In addition to the mean-variance objective, we construct a portfolio whose allocation is given by model predictive control with a risk-parity objective,…

We introduce a financial portfolio optimization framework that allows us to automatically select the relevant assets and estimate their weights by relying on a sorted $\ell_1$-Norm penalization, henceforth SLOPE. Our approach is able to…

We use multi-class machine learning classifiers to identify the stocks that outperform or underperform other stocks. The resulting long-short portfolios achieve annual Sharpe ratios of 1.67 (value-weighted) and 3.35 (equal-weighted), with…

We present a detailed study of the performance of a trading rule that uses moving average of past returns to predict future returns on stock indexes. Our main goal is to link performance and the stochastic process of the traded asset. Our…

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…

This paper considers mean-variance optimization under uncertainty, specifically when one desires a sparsified set of optimal portfolio weights. From the standpoint of a Bayesian investor, our approach produces a small portfolio from many…

We define risk-free portfolios using three gauge invariant differential operators that require such portfolios to be insensitive to price changes, to be self-financing, and to produce a zero real return so there are no risk-free profits.…

The downside risk of a portfolio of (equity)assets is generally substantially higher than the downside risk of its components. In particular in times of crises when assets tend to have high correlation, the understanding of this difference…

During the last few years, there has been an interest in comparing simple or heuristic procedures for portfolio selection, such as the naive, equal weights, portfolio choice, against more "sophisticated" portfolio choices, and in explaining…

We introduce new mathematical methods to study the optimal portfolio size of investment portfolios over time, considering investors with varying skill levels. First, we explore the benefit of portfolio diversification on an annual basis for…

We study hedging and pricing of unattainable contingent claims in a non-Markovian regime-switching financial model. Our financial market consists of a bank account and a risky asset whose dynamics are driven by a Brownian motion and a…

Stock portfolio optimization is the process of continuous reallocation of funds to a selection of stocks. This is a particularly well-suited problem for reinforcement learning, as daily rewards are compounding and objective functions may…

In modern portfolio theory, the balancing of expected returns on investments against uncertainties in those returns is aided by the use of utility functions. The Kelly criterion offers another approach, rooted in information theory, that…

The success of a cross-sectional systematic strategy depends critically on accurately ranking assets prior to portfolio construction. Contemporary techniques perform this ranking step either with simple heuristics or by sorting outputs from…

We give a complete algorithm and source code for constructing what we refer to as heterotic risk models (for equities), which combine: i) granularity of an industry classification; ii) diagonality of the principal component factor…

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…

We solve a min-max problem in a robust exploratory mean-variance problem with drift uncertainty in this paper. It is verified that robust investors choose the Sharpe ratio with minimal $L^2$ norm in an admissible set. A reinforcement…

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…