Related papers: Market Efficiency and Growth Optimal Portfolio
This paper derives a portfolio decomposition formula when the agent maximizes utility of her wealth at some finite planning horizon. The financial market is complete and consists of multiple risky assets (stocks) plus a risk free asset. The…
Portfolio management problems are often divided into two types: active and passive, where the objective is to outperform and track a preselected benchmark, respectively. Here, we formulate and solve a dynamic asset allocation problem that…
Stock price prediction is a challenging task and a lot of propositions exist in the literature in this area. Portfolio construction is a process of choosing a group of stocks and investing in them optimally to maximize the return while…
In this article, the long-term behavior of the stock market index of the New York Stock Exchange is studied, for the period 1950 to 2013. Specifically, the CRSP Value-Weighted and CRSP Equal-Weighted index are analyzed in terms of market…
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…
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…
Designing an optimum portfolio for allocating suitable weights to its constituent assets so that the return and risk associated with the portfolio are optimized is a computationally hard problem. The seminal work of Markowitz that attempted…
We consider the problem of portfolio optimization with a correlation constraint. The framework is the multiperiod stochastic financial market setting with one tradable stock, stochastic income and a non-tradable index. The correlation…
A {log-optimal} portfolio is any portfolio that maximizes the expected logarithmic growth (ELG) of an investor's wealth. This maximization problem typically assumes that the information of the true distribution of returns is known to the…
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…
Stock portfolio optimization is the process of constant re-distribution of money to a pool of various stocks. In this paper, we will formulate the problem such that we can apply Reinforcement Learning for the task properly. To maintain a…
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…
We calculate explicitly the optimal strategy for an investor with exponential utility function when the stock price follows an autoregressive Gaussian process. We also calculate its performance and analyse it when the trading horizon tends…
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…
We analyze characteristics' joint predictive information through the lens of out-of-sample power utility functions. Linking weights to characteristics to form optimal portfolios suffers from estimation error which we mitigate by maximizing…
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…
Optimal portfolio selection problems are determined by the (unknown) parameters of the data generating process. If an investor wants to realise the position suggested by the optimal portfolios, he/she needs to estimate the unknown…
Portfolio optimization has been an area of research that has attracted a lot of attention from researchers and financial analysts. Designing an optimum portfolio is a complex task since it not only involves accurate forecasting of future…
Utility and risk are two often competing measurements on the investment success. We show that efficient trade-off between these two measurements for investment portfolios happens, in general, on a convex curve in the two dimensional space…
For $n$ assets and discrete-time rebalancing, the probability to complete a given schedule of investments and withdrawals is maximized over progressively measurable portfolio weight functions. Applications consider two assets, namely the…