Related papers: Portfolio Optimization Rules beyond the Mean-Varia…
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…
This paper presents how the most recent improvements made on covariance matrix estimation and model order selection can be applied to the portfolio optimisation problem. The particular case of the Maximum Variety Portfolio is treated but…
We revisit Markowitz's mean-variance portfolio selection model by considering a distributionally robust version, where the region of distributional uncertainty is around the empirical measure and the discrepancy between probability measures…
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…
The asymptotic distribution of the Markowitz portfolio is derived, for the general case (assuming fourth moments of returns exist), and for the case of multivariate normal returns. The derivation allows for inference which is robust to…
We propose a data-driven portfolio selection model that integrates side information, conditional estimation and robustness using the framework of distributionally robust optimization. Conditioning on the observed side information, the…
Recent studies about cryptocurrency returns show that its distribution can be highly-peaked, skewed, and heavy-tailed, with a large excess kurtosis. To accommodate all these peculiarities, we propose the asymmetric Laplace scale mixture…
In this paper, we document a novel machine learning based bottom-up approach for static and dynamic portfolio optimization on, potentially, a large number of assets. The methodology applies to general constrained optimization problems and…
It is well known that the out-of-sample performance of Markowitz's mean-variance portfolio criterion can be negatively affected by estimation errors in the mean and covariance. In this paper we address the problem by regularizing the…
We consider a group of mean-variance investors with mimicking desire such that each investor is willing to penalize deviations of his portfolio composition from compositions of other group members. Penalizing norm constraints are already…
This work initiates research into the problem of determining an optimal investment strategy for investors with different attitudes towards the trade-offs of risk and profit. The probability distribution of the return values of the stocks…
A drawdown constraint forces the current wealth to remain above a given function of its maximum to date. We consider the portfolio optimisation problem of maximising the long-term growth rate of the expected utility of wealth subject to a…
Performance analysis, from the external point of view of a client who would only have access to returns and holdings of a fund, evolved towards exact attribution made in the context of portfolio optimisation, which is the internal point of…
In this paper we estimate the mean-variance portfolio in the high-dimensional case using the recent results from the theory of random matrices. We construct a linear shrinkage estimator which is distribution-free and is optimal in the sense…
The mean-variance portfolio model, based on the risk-return trade-off for optimal asset allocation, remains foundational in portfolio optimization. However, its reliance on restrictive assumptions about asset return distributions limits its…
Markowitz' celebrated optimal portfolio theory generally fails to deliver out-of-sample diversification. In this note, we propose a new portfolio construction strategy based on symmetry arguments only, leading to "Eigenrisk Parity"…
The idiosyncratic (microscopic) and systemic (macroscopic) components of market structure have been shown to be responsible for the departure of the optimal mean-variance allocation from the heuristic `equally-weighted' portfolio. In this…
Motivated by the problem of utility allocation in a portfolio under a Markowitz mean-variance choice paradigm, we propose an allocation criterion for the variance of the sum of $n$ possibly dependent random variables. This criterion, the…
Changes in market conditions present challenges for investors as they cause performance to deviate from the ranges predicted by long-term averages of means and covariances. The aim of conditional asset allocation strategies is to overcome…
We investigate the use of Kelly's strategy in the construction of an optimal portfolio of assets. For lognormally distributed asset returns, we derive approximate analytical results for the optimal investment fractions in various settings.…