Related papers: Beta-Sorted Portfolios
Risk aggregation is a popular method used to estimate the sum of a collection of financial assets or events, where each asset or event is modelled as a random variable. Applications, in the financial services industry, include insurance,…
We investigate the possible drawbacks of employing the standard Pearson estimator to measure correlation coefficients between financial stocks in the presence of non-stationary behavior, and we provide empirical evidence against the…
For a Bayesian, real-time forecasting with the posterior predictive distribution can be challenging for a variety of time series models. First, estimating the parameters of a time series model can be difficult with sample-based approaches…
The global minimum-variance portfolio is a typical choice for investors because of its simplicity and broad applicability. Although it requires only one input, namely the covariance matrix of asset returns, estimating the optimal solution…
Searching for new effective risk factors on stock returns is an important research topic in asset pricing. Factor modeling is an active research topic in statistics and econometrics, with many new advances. However, these new methods have…
In portfolio optimization problems, the minimum expected investment risk is not always smaller than the expected minimal investment risk. That is, using a well-known approach from operations research, it is possible to derive a strategy…
Optimizing portfolio performance is a fundamental challenge in financial modeling, requiring the integration of advanced clustering techniques and data-driven optimization strategies. This paper introduces a comparative backtesting approach…
This paper investigates a time-inconsistent portfolio selection problem in the incomplete mar ket model, integrating expected utility maximization with risk control. The objective functional balances the expected utility and variance on log…
The implementation of Bayesian predictive procedures under standard normal models is considered. Two distributions are of particular interest, the K-prime and K-square distributions. They also give exact inferences for simple and multiple…
We consider evaluation methods for payoffs with an inherent financial risk as encountered for instance for portfolios held by pension funds and insurance companies. Pricing such payoffs in a way consistent to market prices typically…
This survey reviews portfolio choice in settings where investment opportunities are stochastic due to, e.g., stochastic volatility or return predictability. It is explained how to heuristically compute candidate optimal portfolios using…
We propose a novel conditional diffusion model for contextual portfolio optimization that learns the cross-sectional distribution of next-day stock returns conditioned on high-dimensional asset-specific factors. Our model leverages a…
Prediction models are traditionally optimized independently from their use in the asset allocation decision-making process. We address this shortcoming and present a framework for integrating regression prediction models in a mean-variance…
Covariate balancing is a popular technique for controlling confounding in observational studies. It finds weights for the treatment group which are close to uniform, but make the group's covariate means (approximately) equal to those of the…
In this study, we address the challenge of portfolio optimization, a critical aspect of managing investment risks and maximizing returns. The mean-CVaR portfolio is considered a promising method due to today's unstable financial market…
The problem of estimation error in portfolio optimization is discussed, in the limit where the portfolio size N and the sample size T go to infinity such that their ratio is fixed. The estimation error strongly depends on the ratio N/T and…
Simulation methods have always been instrumental in finance, and data-driven methods with minimal model specification, commonly referred to as generative models, have attracted increasing attention, especially after the success of deep…
Among professionals and academics alike, it is well known that active portfolio management is unable to provide additional risk-adjusted returns relative to their benchmarks. For this reason, passive wealth management has emerged in recent…
Despite being described as a medium of exchange, cryptocurrencies do not have the typical attributes of a medium of exchange. Consequently, cryptocurrencies are more appropriately described as crypto assets. A common investment attribute…
In this paper, we propose a market model with returns assumed to follow a multivariate normal tempered stable distribution defined by a mixture of the multivariate normal distribution and the tempered stable subordinator. This distribution…