Related papers: Performance vs Persistence : Assess the alpha to i…
In this paper, we use replica analysis to investigate the influence of correlation among the return rates of assets on the solution of the portfolio optimization problem. We consider the behavior of the optimal solution for the case where…
This paper studies new tests for the number of latent factors in a large cross-sectional factor model with small time dimension. These tests are based on the eigenvalues of variance-covariance matrices of (possibly weighted) asset returns,…
This paper introduces an innovative framework for the periodic evaluation of defined-contribution pension funds. The performance of the pension fund is evaluated not only at retirement, but also within the interim periods. In contrast to…
We present extensive evidence that ``risk premium'' is strongly correlated with tail-risk skewness but very little with volatility. We introduce a new, intuitive definition of skewness and elicit an approximately linear relation between the…
We study the data-generating processes for factors expressed in return differences, which the literature on time-series asset pricing seems to have overlooked. For the factors' data-generating processes or long-short zero-cost portfolios, a…
We consider models of financial markets in which all parties involved find incentives to participate. Strategies are evaluated directly by their virtual wealths. By tuning the price sensitivity and market impact, a phase diagram with…
We present conditions under which positive alpha exists in the realm of active portfolio management- in contrast to the controversial result in Jarrow (2010, pg. 20) which implicates delegated portfolio management by surmising that positive…
For long term investments, model portfolios are defined at the level of indexes, a setup known as Strategic Asset Allocation (SAA). The possible outcomes at a scale of a few decades can be obtained by Monte Carlo simulations, resulting in a…
Project Management process plays a significant role in effective development of software projects. Key challenges in the project management process are the estimation of time, cost, defect count, and subsequently selection of apt…
The paper examines the performance of regression models (OLS linear regression, Ridge regression, Random Forest, and Fully-connected Neural Network) on the prediction of CMA (Conservative Minus Aggressive) factor premium and the performance…
The article discusses selected problems related to both principal component analysis (PCA) and factor analysis (FA). In particular, both types of analysis were compared. A vector interpretation for both PCA and FA has also been proposed.…
Measures of risk concentration and their asymptotic behavior for portfolios with heavy-tailed risk factors is of interest in risk management. Second order regular variation is a structural assumption often imposed on such risk factors to…
We develop a deep reinforcement learning framework for dynamic portfolio optimization that combines a Dirichlet policy with cross-sectional attention mechanisms. The Dirichlet formulation ensures that portfolio weights are always feasible,…
The research described herewith is to re-visit the classical doubly robust estimation of average treatment effect by conducting a systematic study on the comparisons, in the sense of asymptotic efficiency, among all possible combinations of…
The Capital Asset Pricing Model (CAPM) is one of the original models in explaining risk-return relationship in the financial market. However, when applying the CAPM into reality, it demonstrates a lot of shortcomings. While improving the…
Financial metrics like the Sharpe ratio are pivotal in evaluating investment performance by balancing risk and return. However, traditional metrics often struggle with robustness and generalization, particularly in dynamic and volatile…
Multi-aspect user preferences are attracting wider attention in recommender systems, as they enable more detailed understanding of users' evaluations of items. Previous studies show that incorporating multi-aspect preferences can greatly…
There are inefficiencies in financial markets, with unexploited patterns in price, volume, and cross-sectional relationships. While many approaches use large-scale transformers, we take a domain-focused path: feed-forward and recurrent…
We study portfolio selection in a complete continuous-time market where the preference is dictated by the rank-dependent utility. As such a model is inherently time inconsistent due to the underlying probability weighting, we study the…
This paper discusses the sensitivity of the long-term expected utility of optimal portfolios for an investor with constant relative risk aversion. Under an incomplete market given by a factor model, we consider the utility maximization…