Related papers: Market Efficiency and Growth Optimal Portfolio
Most of parameters used to describe states and dynamics of financial market depend on proportions of the appropriate variables rather than on their actual values. Therefore, projective geometry seems to be the correct language to describe…
In portfolio analysis, the traditional approach of replacing population moments with sample counterparts may lead to suboptimal portfolio choices. I show that optimal portfolio weights can be estimated using a machine learning (ML)…
Portfolio optimisation is essential in quantitative investing, but its implementation faces several practical difficulties. One particular challenge is converting optimal portfolio weights into real-life trades in the presence of realistic…
Classical mean-variance portfolio theory tells us how to construct a portfolio of assets which has the greatest expected return for a given level of return volatility. Utility theory then allows an investor to choose the point along this…
This chapter presents a comparative study of the three portfolio optimization methods, MVP, HRP, and HERC, on the Indian stock market, particularly focusing on the stocks chosen from 15 sectors listed on the National Stock Exchange of…
Artificial intelligence is transforming financial investment decision-making frameworks, with deep reinforcement learning demonstrating substantial potential in robo-advisory applications. This paper addresses the limitations of traditional…
We build the time series of optimal realized portfolio weights from high-frequency data and we suggest a novel Dynamic Conditional Weights (DCW) model for their dynamics. DCW is benchmarked against popular model-based and model-free…
Since its conception, the cryptocurrency market has been frequently described as an immature market, characterized by significant swings in volatility and occasionally described as lacking rhyme or reason. There has been great speculation…
The Sharpe ratio is an important and widely-used risk-adjusted return in financial engineering. In modern portfolio management, one may require an m-sparse (no more than m active assets) portfolio to save managerial and financial costs.…
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…
The effectiveness of utility-maximization techniques for portfolio management relies on our ability to estimate correctly the parameters of the dynamics of the underlying financial assets. In the setting of complete or incomplete financial…
Macroscopic properties of equity markets affect the performance of active equity strategies but many are not adequately captured by conventional models of financial mathematics and econometrics. Using the CRSP Database of the US equity…
We study how to assess the potential benefit of diversifying an equity portfolio by investing within and across equity sectors. We analyse 20 years of US stock price data, which includes the global financial crisis (GFC) and the COVID-19…
We consider the problem of optimal inside portfolio $\pi(t)$ in a financial market with a corresponding wealth process $X(t)=X^{\pi}(t)$ modelled by \begin{align}\label{eq0.1} \begin{cases} dX(t)&=\pi(t)X(t)[\alpha(t)dt+\beta(t)dB(t)];…
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…
We study the continuous time portfolio optimization model on the market where the mean returns of individual securities or asset categories are linearly dependent on underlying economic factors. We introduce the functional $Q_\gamma$…
We propose a novel portfolio selection approach that manages to ease some of the problems that characterise standard expected utility maximisation. The optimal portfolio is no longer defined as the extremum of a suitably chosen utility…
Whether or not stocks are predictable has been a topic of concern for decades.The efficient market hypothesis (EMH) says that it is difficult for investors to make extra profits by predicting stock prices, but this may not be true,…
The potential benefits of portfolio diversification have been known to investors for a long time. Markowitz (1952) suggested the seminal approach for optimizing the portfolio problem based on finding the weights as budget shares that…
In this paper we seek to demonstrate the predictability of stock market returns and explain the nature of this return predictability. To this end, we introduce investors with different investment horizons into the news-driven, analytic,…