Related papers: Markowitz Portfolio Construction at Seventy
Modeling and managing portfolio risk is perhaps the most important step to achieve growing and preserving investment performance. Within the modern portfolio construction framework that built on Markowitz's theory, the covariance matrix of…
This survey article is dedicated to the life of the famous American economist H. Markowitz (1927--2023). We do revisit the main statements of the portfolio selection theory in terms of mathematical completeness including all the necessary…
Using daily returns of the S&P 500 stocks from 2001 to 2011, we perform a backtesting study of the portfolio optimization strategy based on the extreme risk index (ERI). This method uses multivariate extreme value theory to minimize the…
We consider a reference security, understood to be an attractive investment, with the caveat that an investor is not willing to directly invest in the security, for presence of constraints, either investor specific or pertaining to the…
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 how to optimally allocate investments in a portfolio of competing technologies using the standard mean-variance framework of portfolio theory. We assume that technologies follow the empirically observed relationship known as…
A cryptocurrency is a digital asset maintained by a decentralised system using cryptography. Investors in this emerging digital market are exploring the profitability potential of portfolios in place of single coins. Portfolios are…
In this paper, we propose a market model with returns assumed to follow a multivariate normal tempered stable distribution defined by a mixture of the multivariate normal distribution and the tempered stable subordinator. This distribution…
Recent advances in quantum hardware offer new approaches to solve various optimization problems that can be computationally expensive when classical algorithms are employed. We propose a hybrid quantum-classical algorithm to solve a dynamic…
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…
Fixed income has received far less attention than equity portfolio optimisation since Markowitz' original work of 1952, partly as a result of the need to model rates and credit risk. We argue that the shape of the efficient frontier is…
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…
An investment portfolio consists of $n$ algorithmic trading strategies, which generate vectors of positions in trading assets. Sign opposite trades (buy/sell) cross each other as strategies are combined in a portfolio. Then portfolio…
We propose a novel portfolio selection approach that manages to ease some of the problems that characterise standard expected utility maximisation. The optimal portfolio is no longer defined as the extremum of a suitably chosen utility…
In this work, we consider weighted signed network representations of financial markets derived from raw or denoised correlation matrices, and examine how negative edges can be exploited to reduce portfolio risk. We then propose a discrete…
We consider an investor, whose portfolio consists of a single risky asset and a risk free asset, who wants to maximize his expected utility of the portfolio subject to the Value at Risk assuming a heavy tail distribution of the stock prices…
This paper proposes a new method for financial portfolio optimization based on reducing simultaneous asset shocks across a collection of assets. This may be understood as an alternative approach to risk reduction in a portfolio based on a…
We consider the issue of solution uniqueness for portfolio optimization problem and its inverse for asset returns with a finite number of possible scenarios. The risk is assessed by deviation measures introduced by [Rockafellar et al.,…
In this paper we develop a concrete and fully implementable approach to the optimization of functionally generated portfolios in stochastic portfolio theory. The main idea is to optimize over a family of rank-based portfolios parameterized…
I discuss some theoretical results with a view to motivate some practical choices in portfolio optimization. Even though the setting is not completely general (for example, the covariance matrix is assumed to be non-singular), I attempt to…