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This paper examines the implementation of a statistical arbitrage trading strategy based on co-integration relationships where we discover candidate portfolios using multiple factors rather than just price data. The portfolio selection…
A pair-trading strategy is an approach that utilizes the fluctuations between prices of a pair of stocks in a short-term time frame, while in the long-term the pair may exhibit a strong association and co-movement pattern. When the prices…
The fundamental principle in Modern Portfolio Theory (MPT) is based on the quantification of the portfolio's risk related to performance. Although MPT has made huge impacts on the investment world and prompted the success and prevalence of…
We prove that the Omega measure, which considers all moments when assessing portfolio performance, is equivalent to the widely used Sharpe ratio under jointly elliptic distributions of returns. Portfolio optimization of the Sharpe ratio is…
This paper investigates dynamic and static fund separations and their stability for long-term optimal investments under three model classes. An investor maximizes the expected utility with constant relative risk aversion under an incomplete…
A market portfolio is a portfolio in which each asset is held at a weight proportional to its market value. Functionally generated portfolios are portfolios for which the logarithmic return relative to the market portfolio can be decomposed…
Stability selection is a popular method for improving feature selection algorithms. One of its key attributes is that it provides theoretical upper bounds on the expected number of false positives, E(FP), enabling false positive control in…
Parametric Portfolio Policies (PPP) estimate optimal portfolio weights directly as functions of observable signals by maximizing expected utility, bypassing the need to model asset returns and covariances. However, PPP ignores policy risk.…
In the smart grid, the prosumers can sell unused electricity back to the power grid, assuming the prosumers own renewable energy sources and storage units. The maximizing of their profits under a dynamic electricity market is a problem that…
Sharp asymptotic lower bounds of the expected quadratic variation of discretization error in stochastic integration are given. The theory relies on inequalities for the kurtosis and skewness of a general random variable which are themselves…
In this paper, we solve portfolio rebalancing problem when security returns are represented by uncertain variables considering transaction costs. The performance of the proposed model is studied using constant-proportion portfolio insurance…
We empirically test predictability on asset price by using stock selection rules based on maximum drawdown and its consecutive recovery. In various equity markets, monthly momentum- and weekly contrarian-style portfolios constructed from…
Active investing aims to construct a portfolio of assets that are believed to be relatively profitable in the markets, with one popular method being to construct a portfolio via factor-based strategies. In recent years, there have been…
Dollar-Cost Averaging (DCA) is a widely used technique to mitigate volatility in long-term investments of appreciating assets. However, the inefficiency of DCA arises from fixing the investment amount regardless of market conditions. In…
Behavioral Finance has become a challenge to the scientific community. Based on the assumption that behavioral aspects of investors may explain some features of the Stock Market, we propose an agent based model to study quantitatively this…
In this paper, we propose a method for evaluating autonomous trading strategies that provides realistic expectations, regarding the strategy's long-term performance. This method addresses This method addresses many pitfalls that currently…
The Total Portfolio Approach and Strategic Asset Allocation are widely viewed as competing frameworks for institutional portfolio management. We argue they differ in a single governance parameter: the tracking error constraint. Using U.S.…
Active portfolio management tries to incorporate any source of meaningful information into the asset selection process. In this contribution we consider qualitative views specified as total orders of the expected asset returns and discuss…
This chapter presents a calendar rebalancing approach to portfolios of stocks in the Indian stock market. Ten important sectors of the Indian economy are first selected. For each of these sectors, the top ten stocks are identified based on…
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…