Related papers: Dynamic Factor Model-Based Multiperiod Mean-Varian…
There is a great number of factors to take into account when building and managing an investment portfolio. It is widely believed that a proper set-up of the portfolio combined with a good, robust management strategy is the key to…
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…
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 $Q_\gamma$…
In this paper, we propose a price staleness factor model that accounts for pervasive market friction across assets and incorporates relevant covariates. Using large-panel high-frequency data, we derive the maximum likelihood estimators of…
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…
This paper studies the mean-variance optimal portfolio choice of an investor pre-committed to a deterministic investment policy in continuous time in a market with mean-reversion in the risk-free rate and the equity risk-premium. In the…
We combine high-dimensional factor models with fractional integration methods and derive models where nonstationary, potentially cointegrated data of different persistence is modelled as a function of common fractionally integrated factors.…
The dynamic portfolio optimization problem in finance frequently requires learning policies that adhere to various constraints, driven by investor preferences and risk. We motivate this problem of finding an allocation policy within a…
We build a state-of-the-art dynamic model of private asset allocation that considers five key features of private asset markets: (1) the illiquid nature of private assets, (2) timing lags between capital commitments, capital calls, and…
We consider the stochastic optimal control problem of nonlinear mean-field systems in discrete time. We reformulate the problem into a deterministic control problem with marginal distribution as controlled state variable, and prove that…
Beta-sorted portfolios -- portfolios comprised of assets with similar covariation to selected risk factors -- are a popular tool in empirical finance to analyze models of (conditional) expected returns. Despite their widespread use, little…
Drifts of asset returns are notoriously difficult to model accurately and, yet, trading strategies obtained from portfolio optimization are very sensitive to them. To mitigate this well-known phenomenon we study robust growth-optimization…
This paper develops a dynamic factor model in which common level and volatility factors evolve jointly, allowing conditional means and variances to interact endogenously within a large-information setting. The joint evolution of these…
We propose a data-driven portfolio selection model that integrates side information, conditional estimation and robustness using the framework of distributionally robust optimization. Conditioning on the observed side information, the…
Income and risk coexist, yet investors are often so focused on chasing high returns that they overlook the potential risks that can lead to high losses. Therefore, risk forecasting and risk control is the cornerstone of investment. To…
This research considers the ranking and selection with input uncertainty. The objective is to maximize the posterior probability of correctly selecting the best alternative under a fixed simulation budget, where each alternative is measured…
Volatilities, in high-dimensional panels of economic time series with a dynamic factor structure on the levels or returns, typically also admit a dynamic factor decomposition. We consider a two-stage dynamic factor model method recovering…
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…
Changes in market conditions present challenges for investors as they cause performance to deviate from the ranges predicted by long-term averages of means and covariances. The aim of conditional asset allocation strategies is to overcome…
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…