Related papers: Formulations to select assets for constructing spa…
Sparse index tracking is a prominent passive portfolio management strategy that constructs a sparse portfolio to track a financial index. A sparse portfolio is preferable to a full portfolio in terms of reducing transaction costs and…
We address the problem of partial index tracking, replicating a benchmark index using a small number of assets. Accurate tracking with a sparse portfolio is extensively studied as a classic finance problem. However in practice, a tracking…
We study the construction and rebalancing of sparse index-tracking portfolios from an operational research perspective, with explicit emphasis on uncertainty quantification and implementability. The decision variables are portfolio weights…
The passive management approach offers conservative investors a way to reduce risk concerning the market. This investment strategy aims at replicating a specific index, such as the NASDAQ Composite or the FTSE100 index. The problem is that…
This paper uses topological data analysis (TDA) tools and introduces a data-driven clustering-based stock selection strategy tailored for sparse portfolio construction. Our asset selection strategy exploits the topological features of stock…
Index tracking, also known as passive investing, has gained significant traction in financial markets due to its cost-effective and efficient approach to replicating the performance of a specific market index. This review paper provides a…
The existing approaches to sparse wealth allocations (1) are limited to low-dimensional setup when the number of assets is less than the sample size; (2) lack theoretical analysis of sparse wealth allocations and their impact on portfolio…
We develop a methodology for index tracking and risk exposure control using financial derivatives. Under a continuous-time diffusion framework for price evolution, we present a pathwise approach to construct dynamic portfolios of…
Portfolio management problems are often divided into two types: active and passive, where the objective is to outperform and track a preselected benchmark, respectively. Here, we formulate and solve a dynamic asset allocation problem that…
Portfolio optimization involves selecting asset weights to minimize a risk-reward objective, such as the portfolio variance in the classical minimum-variance framework. Sparse portfolio selection extends this by imposing a cardinality…
In this research, we introduce a novel methodology for the index tracking problem with sparse portfolios by leveraging topological data analysis (TDA). Utilizing persistence homology to measure the riskiness of assets, we introduce a…
This paper considers portfolio construction in a dynamic setting. We specify a loss function comprised of utility and complexity components with an unknown tradeoff parameter. We develop a novel regret-based criterion for selecting the…
Recently, $L_1$ regularization have been attracted extensive attention and successfully applied in mean-variance portfolio selection for promoting out-of-sample properties and decreasing transaction costs. However, $L_1$ regularization…
Given multivariate time series, we study the problem of forming portfolios with maximum mean reversion while constraining the number of assets in these portfolios. We show that it can be formulated as a sparse canonical correlation analysis…
This paper investigates the problem of ensembling multiple strategies for sequential portfolios to outperform individual strategies in terms of long-term wealth. Due to the uncertainty of strategies' performances in the future market, which…
An actively managed portfolio almost never beats the market in the long term. Thus, many investors often resort to passively managed portfolios whose aim is to follow a certain financial index. The task of building such passive portfolios…
We develop and implement methods for determining whether relaxing sparsity constraints on portfolios improves the investment opportunity set for risk-averse investors. We formulate a new estimation procedure for sparse second-order…
An index tracker is a passive investment reproducing the return and risk of a market index, an enhanced index tracker offers a return greater than the index. We consider the selection of a portfolio of given cardinality to track an index,…
Index tracking is a popular form of asset management. Typically, a quadratic function is used to define the tracking error of a portfolio and the look back approach is applied to solve the index tracking problem. We argue that a forward…
We aim to cluster financial assets in order to identify a small set of stocks to approximate the level of diversification of the whole universe of stocks. We develop a data-driven approach to clustering based on a correlation blockmodel in…