Related papers: A return-diversification approach to portfolio sel…
The mean-variance portfolio that considers the trade-off between expected return and risk has been widely used in the problem of asset allocation for multi-asset portfolios. However, since it is difficult to estimate the expected return and…
We study mean-risk optimal portfolio problems where risk is measured by Recovery Average Value at Risk, a prominent example in the class of recovery risk measures. We establish existence results in the situation where the joint distribution…
Integer variables allow the treatment of some portfolio optimization problems in a more realistic way and introduce the possibility of adding some natural features to the model. We propose an algebraic approach to maximize the expected…
Portfolio optimization methods have evolved significantly since Markowitz introduced the mean-variance framework in 1952. While the theoretical appeal of this approach is undeniable, its practical implementation poses important challenges,…
This paper considers mean-variance optimization under uncertainty, specifically when one desires a sparsified set of optimal portfolio weights. From the standpoint of a Bayesian investor, our approach produces a small portfolio from many…
Diversifying return results is an important research topic in retrieval systems in order to satisfy both the various interests of customers and the equal market exposure of providers. There has been growing attention on diversity-aware…
Risk control and optimal diversification constitute a major focus in the finance and insurance industries as well as, more or less consciously, in our everyday life. We present a discussion of the characterization of risks and of the…
The portfolio optimization problem in which the variances of the return rates of assets are not identical is analyzed in this paper using the methodology of statistical mechanical informatics, specifically, replica analysis. We define two…
We empirically test predictability on asset price by using stock selection rules based on maximum drawdown and its consecutive recovery. In various equity markets, monthly momentum- and weekly contrarian-style portfolios constructed from…
We present a multi-objective portfolio decision model that involves selecting both a portfolio of projects and a set of elements to allocate to each project. Our model includes a defined set of objectives to optimize, with projects…
Managing a portfolio to a risk model can tilt the portfolio toward weaknesses of the model. As a result, the optimized portfolio acquires downside exposure to uncertainty in the model itself, what we call "second order risk." We propose a…
Portfolio diversification, traditionally measured through asset correlations and volatilitybased metrics, is fundamental to managing financial risk. However, existing diversification metrics often overlook non-numerical relationships…
In this work, we introduce Modern Portfolio Theory using basic concepts from linear algebra, differential calculus, statistics, and optimization. This theory allows us to measure the return and risk of an investment portfolio, serving as a…
We study how to assess the potential benefit of diversifying an equity portfolio by investing within and across equity sectors. We analyse 20 years of US stock price data, which includes the global financial crisis (GFC) and the COVID-19…
We consider an investor who seeks to maximize her expected utility derived from her terminal wealth relative to the maximum performance achieved over a fixed time horizon, and under a portfolio drawdown constraint, in a market with local…
We employ model predictive control for a multi-period portfolio optimization problem. In addition to the mean-variance objective, we construct a portfolio whose allocation is given by model predictive control with a risk-parity objective,…
The field of portfolio selection is an active research topic, which combines elements and methodologies from various fields, such as optimization, decision analysis, risk management, data science, forecasting, etc. The modeling and…
For the past two decades investors have observed long memory and highly correlated behavior of asset classes that does not fit into the framework of Modern Portfolio Theory. Custom correlation and standard deviation estimators consider…
Classical mean-variance portfolio theory tells us how to construct a portfolio of assets which has the greatest expected return for a given level of return volatility. Utility theory then allows an investor to choose the point along this…
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…