Related papers: Efficient Portfolios
Stock price prediction is a challenging task and a lot of propositions exist in the literature in this area. Portfolio construction is a process of choosing a group of stocks and investing in them optimally to maximize the return while…
A classical portfolio theory deals with finding the optimal proportion in which an agent invests a wealth in a risk-free asset and a probabilistic risky asset. Formulating and solving the problem depend on how the risk is represented and…
This paper explores the practical approach to portfolio selection methods for investments. The study delves into portfolio theory, discussing concepts such as expected return, variance, asset correlation, and opportunity sets. It also…
Modern portfolio theory(MPT) addresses the problem of determining the optimum allocation of investment resources among a set of candidate assets. In the original mean-variance approach of Markowitz, volatility is taken as a proxy for risk,…
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…
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…
Investment approaches in financial instruments have been varied and often produce unpredictable results. Many investors in the earlier days of investment banking suffered catastrophical losses due to poor strategy and lack of understanding…
This paper studies an optimal investing problem for a retiree facing longevity risk and living standard risk. We formulate the investing problem as a portfolio choice problem under a time-varying risk capacity constraint. We derive the…
It is well established that in a market with inclusion of a risk-free asset the single-period mean-variance efficient frontier is a straight line tangent to the risky region, a fact that is the very foundation of the classical CAPM. In this…
The conventional wisdom of mean-variance (MV) portfolio theory asserts that the nature of the relationship between risk and diversification is a decreasing asymptotic function, with the asymptote approximating the level of portfolio…
We introduce new mathematical methods to study the optimal portfolio size of investment portfolios over time, considering investors with varying skill levels. First, we explore the benefit of portfolio diversification on an annual basis for…
Markowitz's criterion aims to balance expected return and risk when optimizing the portfolio. The expected return level is usually fixed according to the risk appetite of an investor, then the risk is minimized at this fixed return level.…
We study the continuous-time pre-commitment mean-variance portfolio selection in a time-varying financial market. By introducing two indexes which respectively express the average profitability of the risky asset (AP) and the current…
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,…
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…
The portfolio optimization problem in which the variances of the return rates of assets are not identical is analyzed in this paper using the methodology of statistical mechanical informatics, specifically, replica analysis. We define two…
I demonstrate that with the market return determined by the equilibrium returns of the CAPM, expected returns of an asset are affected by the risks of all assets jointly. Another implication is that the range of feasible market returns will…
This paper studies a robust continuous-time Markowitz portfolio selection pro\-blem where the model uncertainty carries on the covariance matrix of multiple risky assets. This problem is formulated into a min-max mean-variance problem over…
We study the optimal portfolio selection problem under relative performance criteria in the market model with random coefficients from the perspective of many players game theory. We consider five random coefficients which consist of three…
We consider a single-period portfolio selection problem for an investor, maximizing the expected ratio of the portfolio utility and the utility of a best asset taken in hindsight. The decision rules are based on the history of stock returns…