Related papers: Efficient and Scalable Parametric High-Order Portf…
The first moment and second central moments of the portfolio return, a.k.a. mean and variance, have been widely employed to assess the expected profit and risk of the portfolio. Investors pursue higher mean and lower variance when designing…
Portfolio optimization is one of the most studied optimization problems at the intersection of quantum computing and finance. In this work, we develop the first quantum formulation for a portfolio optimization problem with higher-order…
Portfolio optimization emerged with the seminal paper of Markowitz (1952). The original mean-variance framework is appealing because it is very efficient from a computational point of view. However, it also has one well-established failing…
The Markowitz mean-variance portfolio optimization model aims to balance expected return and risk when investing. However, there is a significant limitation when solving large portfolio optimization problems efficiently: the large and dense…
One of the reasons that higher order moment portfolio optimization methods are not fully used by practitioners in investment decisions is the complexity that these higher moments create by making the optimization problem nonconvex. Many few…
Optimal capital allocation between different assets is an important financial problem, which is generally framed as the portfolio optimization problem. General models include the single-period and multi-period cases. The traditional…
In this paper, we develop a time-series-based signed network model for dimensionality reduction in portfolio optimization, grounded in Markowitz's portfolio theory and extended to incorporate higher-order moments of asset return…
Traditional Markowitz portfolio optimization constrains daily portfolio variance to a target value, optimising returns, Sharpe or variance within this constraint. However, this approach overlooks the relationship between variance at…
In this paper, different approaches to portfolio optimization having higher moments such as skewness and kurtosis are classified so that the reader can observe different paradigms and approaches in this field of research which is essential…
In the paper, we consider three quadratic optimization problems which are frequently applied in portfolio theory, i.e, the Markowitz mean-variance problem as well as the problems based on the mean-variance utility function and the quadratic…
This paper aims to develop new mathematical and computational tools for modeling the distribution of portfolio returns across portfolios. We establish relevant mathematical formulas and propose efficient algorithms, drawing upon powerful…
More than seventy years ago Harry Markowitz formulated portfolio construction as an optimization problem that trades off expected return and risk, defined as the standard deviation of the portfolio returns. Since then the method has been…
Markowitz's celebrated mean--variance portfolio optimization theory assumes that the means and covariances of the underlying asset returns are known. In practice, they are unknown and have to be estimated from historical data. Plugging the…
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…
Markowitz mean-variance portfolios with sample mean and covariance as input parameters feature numerous issues in practice. They perform poorly out of sample due to estimation error, they experience extreme weights together with high…
This paper studies a continuous-time market where an agent, having specified an investment horizon and a targeted terminal mean return, seeks to minimize the variance of the return. The optimal portfolio of such a problem is called…
With the good development in the financial industry, the market starts to catch people's eyes, not only by the diversified investing choices ranging from bonds and stocks to futures and options but also by the general "high-risk,…
We show that the Markowitz portfolio is a scalar multiple of another portfolio which replaces the covariance with the second moment matrix, via simple application of the Sherman-Morrison identity. Moreover it is shown that when using…
Markowitz (1952, 1959) laid down the ground-breaking work on the mean-variance analysis. Under his framework, the theoretical optimal allocation vector can be very different from the estimated one for large portfolios due to the intrinsic…
This paper proposes a new method for financial portfolio optimization based on reducing simultaneous asset shocks across a collection of assets. This may be understood as an alternative approach to risk reduction in a portfolio based on a…