Related papers: The Markowitz Category
We propose an alternative linearization to the classical Markowitz quadratic portfolio optimization model, based on maximum drawdown. This model, which minimizes maximum portfolio drawdown, is particularly appealing during times of…
We consider portfolio optimization in futures markets. We model the entire futures price curve at once as a solution of a stochastic partial differential equation. The agents objective is to maximize her utility from the final wealth when…
Entropy based ideas find wide-ranging applications in finance for calibrating models of portfolio risk as well as options pricing. The abstracted problem, extensively studied in the literature, corresponds to finding a probability measure…
In portfolio optimization, decision makers face difficulties from uncertainties inherent in real-world scenarios. These uncertainties significantly influence portfolio outcomes in both classical and multi-objective Markowitz models. To…
Markowitz mean-variance portfolios with sample mean and covariance as input parameters feature numerous issues in practice. They perform poorly out of sample due to estimation error, they experience extreme weights together with high…
The idiosyncratic (microscopic) and systemic (macroscopic) components of market structure have been shown to be responsible for the departure of the optimal mean-variance allocation from the heuristic `equally-weighted' portfolio. In this…
We introduce a universal framework for mean-covariance robust risk measurement and portfolio optimization. We model uncertainty in terms of the Gelbrich distance on the mean-covariance space, along with prior structural information about…
This paper studies a robust continuous-time Markowitz portfolio selection pro\-blem where the model uncertainty carries on the covariance matrix of multiple risky assets. This problem is formulated into a min-max mean-variance problem over…
Markowitz (1952, 1959) laid down the ground-breaking work on the mean-variance analysis. Under his framework, the theoretical optimal allocation vector can be very different from the estimated one for large portfolios due to the intrinsic…
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…
We introduce a solution scheme for portfolio optimization problems with cardinality constraints. Typical portfolio optimization problems are extensions of the classical Markowitz mean-variance portfolio optimization model. We solve such…
Consider an equity market with $n$ stocks. The vector of proportions of the total market capitalizations that belong to each stock is called the market weight. The market weight defines the market portfolio which is a buy-and-hold portfolio…
Traditional Markowitz portfolio optimization constrains daily portfolio variance to a target value, optimising returns, Sharpe or variance within this constraint. However, this approach overlooks the relationship between variance at…
In this paper, we propose a market model with returns assumed to follow a multivariate normal tempered stable distribution defined by a mixture of the multivariate normal distribution and the tempered stable subordinator. This distribution…
The asymptotic distribution of the Markowitz portfolio is derived, for the general case (assuming fourth moments of returns exist), and for the case of multivariate normal returns. The derivation allows for inference which is robust to…
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…
The minimum spanning tree, based on the concept of ultrametricity, is constructed from the correlation matrix of stock returns and provides a meaningful economic taxonomy of the stock market. In order to study the dynamics of this asset…
The paper studies problem of continuous time optimal portfolio selection for a incom- plete market diffusion model. It is shown that, under some mild conditions, near optimal strategies for investors with different performance criteria can…
The Markowitz problem consists of finding in a financial market a self-financing trading strategy whose final wealth has maximal mean and minimal variance. We study this in continuous time in a general semimartingale model and under cone…
A continuous-time Markowitz's mean-variance portfolio selection problem is studied in a market with one stock, one bond, and proportional transaction costs. This is a singular stochastic control problem,inherently in a finite time horizon.…