Related papers: Isotropic Correlation Models for the Cross-Section…
This paper studies the income fluctuation problem with capital income risk (i.e., dispersion in the rate of return to wealth). Wealth returns and labor earnings are allowed to be serially correlated and mutually dependent. Rewards can be…
Correlation matrices inferred from stock return time series contain information on the behaviour of the market, especially on clusters of highly correlating stocks. Here we study a subset of New York Stock Exchange (NYSE) traded stocks and…
We derive the exact form of the eigenvalue spectra of correlation matrices derived from a set of time-shifted, finite Brownian random walks (time-series). These matrices can be seen as random, real, asymmetric matrices with a special…
In this paper we consider an interval portfolio selection problem with uncertain returns and introduce an inclusive concept of satisfaction index for interval inequality relation. Based on the satisfaction index, we propose an approach to…
This paper derives an optimal portfolio that is based on trend-following signal. Building on an earlier related article, it provides a unifying theoretical setting to introduce an autocorrelation model with the covariance matrix of trends…
We propose a group model for correlations in stock markets. In the group model the markets are composed of several groups, within which the stock price fluctuations are correlated. The spectral properties of empirical correlation matrices…
The LLS stock market model is a model of heterogeneous quasi-rational investors operating in a complex environment about which they have incomplete information. We review the main features of this model and several of its extensions. We…
This paper studies a continuous-time market {under stochastic environment} where an agent, having specified an investment horizon and a target terminal mean return, seeks to minimize the variance of the return with multiple stocks and a…
In this brief review, we critically examine the recent work done on correlation-based networks in financial systems. The structure of empirical correlation matrices constructed from the financial market data changes as the individual stock…
In this work, we consider the optimal portfolio selection problem under hard constraints on trading amounts, transaction costs and different rates for borrowing and lending when the risky asset returns are serially correlated. No…
Financial markets, being spectacular examples of complex systems, display rich correlation structures among price returns of different assets. The correlation structures change drastically, akin to phase transitions in physical phenomena,…
Mean-reverting assets are one of the holy grails of financial markets: if such assets existed, they would provide trivially profitable investment strategies for any investor able to trade them, thanks to the knowledge that such assets…
We study the continuous time portfolio optimization model on the market where the mean returns of individual securities or asset categories are linearly dependent on underlying economic factors. We introduce the functional $Q_\gamma$…
The risk of a credit portfolio depends crucially on correlations between the probability of default (PD) in different economic sectors. Often, PD correlations have to be estimated from relatively short time series of default rates, and the…
Factor models have become a common and valued tool for understanding the risks associated with an investing strategy. In this report we describe Exabel's factor model, we quantify the fraction of the variability of the returns explained by…
In this paper, motivated by the celebrated work of Kelly, we consider the problem of portfolio weight selection to maximize expected logarithmic growth. Going beyond existing literature, our focal point here is the rebalancing frequency…
We find a novel correlation structure in the residual noise of stock market returns that is remarkably linked to the composition and stability of the top few significant factors driving the returns, and moreover indicates that the noise…
For a covariance matrix coming from a factor model of returns, we investigate the relationship between the long-only global minimum variance portfolio and the asset exposures to the factors. In the case of a 1-factor model, we provide a…
We present a method for estimating sparse high-dimensional inverse covariance and partial correlation matrices, which exploits the connection between the inverse covariance matrix and linear regression. The method is a two-stage estimation…
We introduce a pathwise approach to analyze the relative performance of an equity portfolio with respect to a benchmark market portfolio. In this energy-entropy framework, the relative performance is decomposed into three components: a…