Related papers: Formulations to select assets for constructing spa…
The sparse portfolio selection problem is one of the most famous and frequently-studied problems in the optimization and financial economics literatures. In a universe of risky assets, the goal is to construct a portfolio with maximal…
Mean-reverting behavior of individuals assets is widely known in financial markets. In fact, we can construct a portfolio that has mean-reverting behavior and use it in trading strategies to extract profits. In this paper, we show that we…
This study examines portfolio selection using predictive models for portfolio returns. Portfolio selection is a fundamental task in finance, and a variety of methods have been developed to achieve this goal. For instance, the mean-variance…
In this paper, we propose a sparse equity portfolio optimization (SEPO) based on the mean-variance portfolio selection model. Aimed at minimizing transaction cost by avoiding small investments, this new model includes $\ell_0$-norm…
We introduce a financial portfolio optimization framework that allows us to automatically select the relevant assets and estimate their weights by relying on a sorted $\ell_1$-Norm penalization, henceforth SLOPE. Our approach is able to…
Portfolio optimization is one of the essential fields of focus in finance. There has been an increasing demand for novel computational methods in this area to compute portfolios with better returns and lower risks in recent years. We…
In this work, we deal with the problem of computing a comprehensive front of efficient solutions in multi-objective portfolio optimization problems in presence of sparsity constraints. We start the discussion pointing out some weaknesses of…
Statistical arbitrage methods identify mispricings in securities with the goal of building portfolios which are weakly correlated with the market. In pairs trading, an arbitrage opportunity is identified by observing relative price…
Portfolio optimization approaches inevitably rely on multivariate modeling of markets and the economy. In this paper, we address three sources of error related to the modeling of these complex systems: 1. oversimplifying hypothesis; 2.…
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…
The popularity of modern portfolio theory has decreased among practitioners because of its unfavorable out-of-sample performance. Estimation errors tend to affect the optimal weight calculation noticeably, especially when a large number of…
Portfolio optimization is a critical task in investment. Most existing portfolio optimization methods require information on the distribution of returns of the assets that make up the portfolio. However, such distribution information is…
The portfolio optimization problem is a basic problem of financial analysis. In the study, an optimization model for constructing an options portfolio with a certain payoff function has been proposed. The model is formulated as an integer…
This paper introduces a methodology for constructing a market index composed of a liquid risky asset and a liquid risk-free asset that achieves a fixed target volatility. Existing volatility-targeting strategies typically scale portfolio…
The Total Portfolio Approach and Strategic Asset Allocation are widely viewed as competing frameworks for institutional portfolio management. We argue they differ in a single governance parameter: the tracking error constraint. Using U.S.…
The problem that is solved in this paper is known as index tracking. The method of Lasso is used to reduce the dimensions of S&P500 index which has many applications in both investment and portfolio management algorithms. The novelty of…
We apply numerical dynamic programming techniques to solve discrete-time multi-asset dynamic portfolio optimization problems with proportional transaction costs and shorting/borrowing constraints. Examples include problems with multiple…
This paper investigates performance attribution measures as a basis for constraining portfolio optimization. We employ optimizations that minimize expected tail loss and investigate both asset allocation (AA) and the selection effect (SE)…
The downside risk of a portfolio of (equity)assets is generally substantially higher than the downside risk of its components. In particular in times of crises when assets tend to have high correlation, the understanding of this difference…
This paper focuses on the application of quantitative portfolio management by using integer programming and clustering techniques. Investors seek to gain the highest profits and lowest risk in capital markets. A data-oriented analysis of US…