Related papers: Market Efficiency and Growth Optimal Portfolio
This paper investigates optimal portfolio strategies in a financial market where the drift of the stock returns is driven by an unobserved Gaussian mean reverting process. Information on this process is obtained from observing stock returns…
In this paper we propose a novel application of Gaussian processes (GPs) to financial asset allocation. Our approach is deeply rooted in Stochastic Portfolio Theory (SPT), a stochastic analysis framework introduced by Robert Fernholz that…
This work derives an approximate analytical single period solution of the portfolio choice problem for the power utility function. It is possible to do so if we consider that the asset returns follow a multivariate normal distribution. It…
Among professionals and academics alike, it is well known that active portfolio management is unable to provide additional risk-adjusted returns relative to their benchmarks. For this reason, passive wealth management has emerged in recent…
This article proposes a unified framework for portfolio optimization (PO), recognizing an object called the `gain probability density function (PDF)' as the fundamental object of the problem from which any objective function could be…
Summarized by the efficient market hypothesis, the idea that stock prices fully reflect all available information is always confronted with the behavior of real-world markets. While there is plenty of evidence indicating and quantifying the…
The mean and variance of portfolio returns are the standard quantities to measure the expected return and risk of a portfolio. Efficient portfolios that provide optimal trade-offs between mean and variance warrant consideration. To express…
This note studies the behavior of an index I_t which is assumed to be a tradable security, to satisfy the BSM model dI_t/I_t = \mu dt + \sigma dW_t, and to be efficient in the following sense: we do not expect a prespecified trading…
We study optimal investment in a financial market having a finite number of assets from a signal processing perspective. We investigate how an investor should distribute capital over these assets and when he should reallocate the…
We explore a decomposition in which returns on a large class of portfolios relative to the market depend on a smooth non-negative drift and changes in the asset price distribution. This decomposition is obtained using general continuous…
Portfolio managers often evaluate performance relative to benchmark, usually taken to be the Standard & Poor 500 stock index fund. This relative portfolio wealth is defined as the absolute portfolio wealth divided by wealth from investing…
Portfolio selection problems that optimize expected utility are usually difficult to solve. If the number of assets in the portfolio is large, such expected utility maximization problems become even harder to solve numerically. Therefore,…
Given financial data from popular sites like Yahoo and the London Exchange, the presented paper attempts to model and predict stocks that can be considered "good investments". Stocks are characterized by 125 features ranging from gross…
We propose and study a simple model of dynamical redistribution of capital in a diversified portfolio. We consider a hypothetical situation of a portfolio composed of N uncorrelated stocks. Each stock price follows a multiplicative random…
This paper studies the topic of cost-efficiency in incomplete markets. A payoff is called cost-efficient if it achieves a given probability distribution at some given investment horizon with a minimum initial budget. Extensive literature…
In this paper, we consider a frequency-based portfolio optimization problem with $m \geq 2$ assets when the expected logarithmic growth (ELG) rate of wealth is used as the performance metric. With the aid of the notion called dominant…
Recognizing that asset markets generally exhibit shared informational characteristics, we develop a portfolio strategy based on transfer learning that leverages cross-market information to enhance the investment performance in the market of…
A geometric analysis of the time series of returns has been performed in the past and it implied that the most of the systematic information of the market is contained in a space of small dimension. Here we have explored subspaces of this…
This paper develops a method to derive optimal portfolios and risk premia explicitly in a general diffusion model for an investor with power utility and a long horizon. The market has several risky assets and is potentially incomplete.…
This work initiates research into the problem of determining an optimal investment strategy for investors with different attitudes towards the trade-offs of risk and profit. The probability distribution of the return values of the stocks…