Related papers: Lost in Diversification
This study identifies and quantifies a significant informational friction embedded in the SEC Form 144 disclosure regime, characterized as predictive decoupling. Drawing on a theoretical foundation of welfare economics, the article argues…
Training convolutional neural networks for image classification tasks usually causes information loss. Although most of the time the information lost is redundant with respect to the target task, there are still cases where discriminative…
Cross-sectional dispersion in firm-level realized skewness is significantly and negatively related to future stock market returns. The predictive power of skewness dispersion is robust to in-sample and out-of-sample estimation and is…
This work presents an asset pricing model that under rational expectation equilibrium perspective shows how, depending on risk aversion and noise volatility, a risky-asset has one equilibrium price that differs in term of efficiency: an…
Stock trend forecasting, which forecasts stock prices' future trends, plays an essential role in investment. The stocks in a market can share information so that their stock prices are highly correlated. Several methods were recently…
Financial global crisis has devastating impacts to economies since early XX century and continues to impose increasing collateral damages for governments, enterprises, and society in general. Up to now, all efforts to obtain efficient…
We present a model describing the competition between information transmission and decision making in financial markets. The solution of this simple model is recalled, and possible variations discussed. It is shown numerically that despite…
We investigate investors voluntary disclosure decisions under uncertainty about their information endowment (Dye 1985). In our model, an investor may receive initial evidence about a target firm. Conditional on learning the initial…
The probability distribution for the relative return of a portfolio constructed from a subset n of the assets from a benchmark, consisting of N assets whose returns are multivariate normal, is completely characterized by its tracking error.…
This paper proposes a dynamic process of portfolio risk measurement to address potential information loss. The proposed model takes advantage of financial big data to incorporate out-of-target-portfolio information that may be missed when…
Diversification represents the idea of choosing variety over uniformity. Within the theory of choice, desirability of diversification is axiomatized as preference for a convex combination of choices that are equivalently ranked. This…
We consider how to optimally allocate investments in a portfolio of competing technologies using the standard mean-variance framework of portfolio theory. We assume that technologies follow the empirically observed relationship known as…
Cryptocurrencies (CCs) have risen rapidly in market capitalization over the last years. Despite striking price volatility, their high average returns have drawn attention to CCs as alternative investment assets for portfolio and risk…
Portfolio optimization is a critical task in investment. Most existing portfolio optimization methods require information on the distribution of returns of the assets that make up the portfolio. However, such distribution information is…
Data Mining is a way of extracting data or uncovering hidden patterns of information from databases. So, there is a need to prevent the inference rules from being disclosed such that the more secure data sets cannot be identified from non…
Every time the customer (individual or company) has to release personal information to its service provider (e.g., an online store or a cloud computing provider), it faces a trade-off between the benefits gained (enhanced or cheaper…
Information theory is gaining popularity as a tool to characterize performance of biological systems. However, information is commonly quantified without reference to whether or how a system could extract and use it; as a result,…
We consider Bayesian optimization of an expensive-to-evaluate black-box objective function, where we also have access to cheaper approximations of the objective. In general, such approximations arise in applications such as reinforcement…
In this paper, we consider a financial market with assets exposed to some risks inducing jumps in the asset prices, and which can still be traded after default times. We use a default-intensity modeling approach, and address in this…
We consider the issue of solution uniqueness for portfolio optimization problem and its inverse for asset returns with a finite number of possible scenarios. The risk is assessed by deviation measures introduced by [Rockafellar et al.,…