Related papers: Portfolio Construction Matters
This paper considers portfolio construction in a dynamic setting. We specify a loss function comprised of utility and complexity components with an unknown tradeoff parameter. We develop a novel regret-based criterion for selecting the…
The stock market offers a platform where people buy and sell shares of publicly listed companies. Generally, stock prices are quite volatile; hence predicting them is a daunting task. There is still much research going to develop more…
This paper studies a portfolio optimization problem in a discrete-time Markovian model of a financial market, in which asset price dynamics depend on an external process of economic factors. There are transaction costs with a structure that…
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…
A new methodology has been introduced to clean the correlation matrix of single stocks returns based on a constrained principal component analysis using financial data. Portfolios were introduced, namely "Fundamental Maximum Variance…
Financial portfolio optimization is a widely studied problem in mathematics, statistics, financial and computational literature. It adheres to determining an optimal combination of weights associated with financial assets held in a…
We study the construction and rebalancing of sparse index-tracking portfolios from an operational research perspective, with explicit emphasis on uncertainty quantification and implementability. The decision variables are portfolio weights…
On a periodic basis, publicly traded companies report fundamentals, financial data including revenue, earnings, debt, among others. Quantitative finance research has identified several factors, functions of the reported data that…
This paper highlights the significance of mesoscale structures, particularly the core-periphery structure, in financial networks for portfolio optimization. We build portfolios of stocks belonging to the periphery part of the Planar…
We study market-to-book ratios of stocks in the context of Stochastic Portfolio Theory. Functionally generated portfolios that depend on auxiliary economic variables other than relative capitalizations ("sizes") are developed in two ways,…
Growth-optimal portfolios are guaranteed to accumulate higher wealth than any other investment strategy in the long run. However, they tend to be risky in the short term. For serially uncorrelated markets, similar portfolios with more…
Feature-based offline algorithm selection has shown its effectiveness in a wide range of optimization problems, including the black-box optimization problem. An algorithm selection system selects the most promising optimizer from an…
The increasing integration of data science techniques into quantitative finance has enabled more systematic and data-driven approaches to portfolio construction. This paper investigates the use of Principal Component Analysis (PCA) in…
Analytical, free of time consuming Monte Carlo simulations, framework for credit portfolio systematic risk metrics calculations is presented. Techniques are described that allow calculation of portfolio-level systematic risk measures…
This study investigates three central questions in portfolio optimization. First, whether time-varying moment estimators outperform conventional sample estimators in practical portfolio construction. Second, whether incorporating a turnover…
Traditional approaches to financial asset allocation start with returns forecasting followed by an optimization stage that decides the optimal asset weights. Any errors made during the forecasting step reduce the accuracy of the asset…
The Sharpe ratio is a way to compare the excess returns (over the risk free asset) of portfolios for each unit of volatility that is generated by a portfolio. In this paper we introduce a robust Sharpe ratio portfolio under the assumption…
We introduce a pathwise approach to analyze the relative performance of an equity portfolio with respect to a benchmark market portfolio. In this energy-entropy framework, the relative performance is decomposed into three components: a…
We develop a framework for stochastic portfolio theory (SPT), which incorporates modern nonlinear price impact and impact decay models. Our main result is the derivation of the celebrated master formula for additive functional generation of…
Classical portfolio optimization methods typically determine an optimal capital allocation through the implicit, yet critical, assumption of statistical time-invariance. Such models are inadequate for real-world markets as they employ…