Related papers: Naive Markowitz Policies
When we implement a portfolio selection methodology under a mean-risk formulation, it is essential to correctly model investors' risk aversion which may be time-dependent, or even state-dependent during the investment procedure. In this…
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…
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…
We consider an optimal investment and risk control problem for an insurer under the mean-variance (MV) criterion. By introducing a deterministic auxiliary process defined forward in time, we formulate an alternative time-consistent problem…
In this paper, we consider a continuous-time mean-variance portfolio selection with regime-switching and random horizon. Unlike previous works, the dynamic of assets are described by non-Markovian regime-switching models in the sense that…
The comparative statics of the optimal portfolios across individuals is carried out for a continuous-time complete market model, where the risky assets price process follows a joint geometric Brownian motion with time-dependent and…
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…
This paper studies the multi-period mean-variance portfolio allocation problem with transaction costs. Many methods have been proposed these last years to challenge the famous uni-period Markowitz strategy.But these methods cannot integrate…
Focusing on gains & losses relative to a risk-free benchmark instead of terminal wealth, we consider an asset allocation problem to maximize time-consistently a mean-risk reward function with a general risk measure which is i)…
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…
We study equilibrium feedback strategies for a family of dynamic mean-variance problems with competition among a large group of agents. We assume that the time horizon is random and each agent's risk aversion depends dynamically on the…
We introduce an infinite-horizon, continuous-time portfolio selection problem faced by an agent with periodic S-shaped preference and present bias. The inclusion of a quasi-hyperbolic discount function leads to time-inconsistency and we…
Selecting the optimal Markowitz porfolio depends on estimating the covariance matrix of the returns of $N$ assets from $T$ periods of historical data. Problematically, $N$ is typically of the same order as $T$, which makes the sample…
We consider continuous-time mean-variance portfolio selection with bankruptcy prohibition under convex cone portfolio constraints. This is a long-standing and difficult problem not only because of its theoretical significance, but also for…
In single-agent Markov decision processes, an agent can optimize its policy based on the interaction with environment. In multi-player Markov games (MGs), however, the interaction is non-stationary due to the behaviors of other players, so…
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.…
This paper studies the equity holders' mean-variance optimal portfolio choice problem for (non-)protected participating life insurance contracts. We derive explicit formulas for the optimal terminal wealth and the optimal strategy in the…
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…
The variance measures the portfolio risks the investors are taking. The investor, who holds his portfolio and doesn't trade his shares, at the current time can use the time series of the market trades that were made during the averaging…
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…