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The proprietary nature of Hedge Fund investing means that it is common practise for managers to release minimal information about their returns. The construction of a Fund of Hedge Funds portfolio requires a correlation matrix which often…
We analyse the effect of a proportional wealth tax on asset returns, portfolio choice, and asset pricing. The tax is levied annually on the market value of all holdings at a uniform rate. We show that such a tax is economically equivalent…
Financial markets are complex adaptive systems characterized by collective behavior and abrupt regime shifts, particularly during crises. This paper studies time-varying dependencies in Nordic equity markets and examines whether…
This paper offers a precise analytical characterization of the distribution of returns for a portfolio constituted of assets whose returns are described by an arbitrary joint multivariate distribution. In this goal, we introduce a…
Although stochastic volatility and GARCH (generalized autoregressive conditional heteroscedasticity) models have successfully described the volatility dynamics of univariate asset returns, extending them to the multivariate models with…
We consider the problem of the statistical uncertainty of the correlation matrix in the optimization of a financial portfolio. We show that the use of clustering algorithms can improve the reliability of the portfolio in terms of the ratio…
This study explores the use of Transformer-based models to predict both covariance and semi-covariance matrices for ETF portfolio optimization. Traditional portfolio optimization techniques often rely on static covariance estimates or…
In order to pursue the issue of the relation between the financial cross-correlations and the conventional Random Matrix Theory we analyse several characteristics of the stock market correlation matrices like the distribution of…
High dimensionality comparable to sample size is common in many statistical problems. We examine covariance matrix estimation in the asymptotic framework that the dimensionality $p$ tends to $\infty$ as the sample size $n$ increases.…
The use of improved covariance matrix estimators as an alternative to the sample estimator is considered an important approach for enhancing portfolio optimization. Here we empirically compare the performance of 9 improved covariance…
The use of discrete material representation in numerical models is advantageous due to the straightforward way it takes into account material heterogeneity and randomness, and the discrete and orientated nature of cracks. Unfortunately, it…
The global minimum-variance portfolio is a typical choice for investors because of its simplicity and broad applicability. Although it requires only one input, namely the covariance matrix of asset returns, estimating the optimal solution…
The benefits of diversifying risks are difficult to estimate quantitatively because of the uncertainties in the dependence structure between the risks. Also, the modelling of multidimensional dependencies is a non-trivial task. This paper…
We construct the maximally predictable portfolio (MPP) of stocks using machine learning. Solving for the optimal constrained weights in the multi-asset MPP gives portfolios with a high monthly coefficient of determination, given the sample…
Providing a measure of market risk is an important issue for investors and financial institutions. However, the existing models for this purpose are per definition symmetric. The current paper introduces an asymmetric capital asset pricing…
The mean-variance portfolio model, based on the risk-return trade-off for optimal asset allocation, remains foundational in portfolio optimization. However, its reliance on restrictive assumptions about asset return distributions limits its…
The properties of q-dependent cross-correlation matrices of stock market have been analyzed by using the random matrix theory and complex network. The correlation structures of the fluctuations at different magnitudes have unique…
In this paper, we revisit the portfolio allocation problem with designated risk-budget [Qian, 2005]. We generalize the problem of arbitrary risk budgets with unequal correlations to one that includes return forecasts and transaction costs…
In this paper, we revisit the relationship between investors' utility functions and portfolio allocation rules. We derive portfolio allocation rules for asymmetric Laplace distributed $ALD(\mu,\sigma,\kappa)$ returns and compare them with…
We compare some methods recently used in the literature to detect the existence of a certain degree of common behavior of stock returns belonging to the same economic sector. Specifically, we discuss methods based on random matrix theory…