Related papers: Geometric insights into robust portfolio construct…
We consider a utility-maximization problem in a general semimartingale financial model, subject to constraints on the number of shares held in each risky asset. These constraints are modeled by predictable convex-set-valued processes whose…
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…
In a discrete-time setting, we study arbitrage concepts in the presence of convex trading constraints. We show that solvability of portfolio optimization problems is equivalent to absence of arbitrage of the first kind, a condition weaker…
In stochastic portfolio theory, a relative arbitrage is an equity portfolio which is guaranteed to outperform a benchmark portfolio over a finite horizon. When the market is diverse and sufficiently volatile, and the benchmark is the market…
This paper studies a type of periodic utility maximization for portfolio management in an incomplete market model, where the underlying price diffusion process depends on some external stochastic factors. The portfolio performance is…
The measure of portfolio risk is an important input of the Markowitz framework. In this study, we explored various methods to obtain a robust covariance estimators that are less susceptible to financial data noise. We evaluated the…
It is well known that quantile regression model minimizes the portfolio extreme risk, whenever the attention is placed on the estimation of the response variable left quantiles. We show that, by considering the entire conditional…
This paper studies some unconventional utility maximization problems when the ratio type relative portfolio performance is periodically evaluated over an infinite horizon. Meanwhile, the agent is prohibited from short-selling stocks. Our…
We provide analytical results for a static portfolio optimization problem with two coherent risk measures. The use of two risk measures is motivated by joint decision-making for portfolio selection where the risk perception of the portfolio…
We consider the mean--variance portfolio optimization problem under the game theoretic framework and without risk-free assets. The problem is solved semi-explicitly by applying the extended Hamilton--Jacobi--Bellman equation. Although the…
Stochastic portfolio theory aims at finding relative arbitrages, i.e. trading strategies which outperform the market with probability one. Functionally generated portfolios, which are deterministic functions of the market weights, are an…
According to recent findings [1,2], empirical covariance matrices deduced from financial return series contain such a high amount of noise that, apart from a few large eigenvalues and the corresponding eigenvectors, their structure can…
Online portfolio selection research has so far focused mainly on minimizing regret defined in terms of wealth growth. Practical financial decision making, however, is deeply concerned with both wealth and risk. We consider online learning…
In this study, we propose a new multi-objective portfolio optimization with idiosyncratic and systemic risks for financial networks. The two risks are measured by the idiosyncratic variance and the network clustering coefficient derived…
We consider the problem of choosing a portfolio that maximizes the cumulative prospect theory (CPT) utility on an empirical distribution of asset returns. We show that while CPT utility is not a concave function of the portfolio weights, it…
It has been widely observed that capitalization-weighted indexes can be beaten by surprisingly simple, systematic investment strategies. Indeed, in the U.S. stock market, equal-weighted portfolios, random-weighted portfolios, and other…
We study the design of portfolios under a minimum risk criterion. The performance of the optimized portfolio relies on the accuracy of the estimated covariance matrix of the portfolio asset returns. For large portfolios, the number of…
Suppose that the edges of a complete graph are assigned weights independently at random and we ask for the weight of the minimal-weight spanning tree, or perfect matching, or Hamiltonian cycle. For these and several other common…
The optimization of large portfolios displays an inherent instability to estimation error. This poses a fundamental problem, because solutions that are not stable under sample fluctuations may look optimal for a given sample, but are, in…
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…