Related papers: End-to-End Large Portfolio Optimization for Varian…
We propose a universal end-to-end framework for portfolio optimization where asset distributions are directly obtained. The designed framework circumvents the traditional forecasting step and avoids the estimation of the covariance matrix,…
Portfolio optimization has been a central problem in finance, often approached with two steps: calibrating the parameters and then solving an optimization problem. Yet, the two-step procedure sometimes encounter the "error maximization"…
Portfolio construction traditionally relies on separately estimating expected returns and covariance matrices using historical statistics, often leading to suboptimal allocation under time-varying market conditions. This paper proposes a…
This paper introduces a neural network-based nonlinear shrinkage estimator of covariance matrices for the purpose of minimum variance portfolio optimization. It is a hybrid approach that integrates statistical estimation with machine…
This paper presents how the most recent improvements made on covariance matrix estimation and model order selection can be applied to the portfolio optimisation problem. The particular case of the Maximum Variety Portfolio is treated but…
This paper investigates an important problem of an appropriate variance-covariance matrix estimation in the Modern Portfolio Theory. We propose a novel framework for variancecovariance matrix estimation for purposes of the portfolio…
In this paper, we document a novel machine learning based bottom-up approach for static and dynamic portfolio optimization on, potentially, a large number of assets. The methodology applies to general constrained optimization problems and…
We study the design of portfolios under a minimum risk criterion. The performance of the optimized portfolio relies on the accuracy of the estimated covariance matrix of the portfolio asset returns. For large portfolios, the number of…
Deep learning offers new tools for portfolio optimization. We present an end-to-end framework that directly learns portfolio weights by combining Long Short-Term Memory (LSTM) networks to model temporal patterns, Graph Attention Networks…
This paper investigates the large sample properties of the variance, weights, and risk of high-dimensional portfolios where the inverse of the covariance matrix of excess asset returns is estimated using a technique called nodewise…
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…
In portfolio risk minimization, the inverse covariance matrix of returns is often unknown and has to be estimated in practice. This inverse covariance matrix also prescribes the hedge trades in which a stock is hedged by all the other…
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…
Machine learning can significantly improve performance for decision-making under uncertainty across a wide range of domains. However, ensuring robustness guarantees requires well-calibrated uncertainty estimates, which can be difficult to…
According to recent findings [1,2], empirical covariance matrices deduced from financial return series contain such a high amount of noise that, apart from a few large eigenvalues and the corresponding eigenvectors, their structure can…
A new wave of work on covariance cleaning and nonlinear shrinkage has delivered asymptotically optimal analytical solutions for large covariance matrices. The same framework has been generalized to empirical cross-covariance matrices, whose…
We study the dynamic portfolio selection of an investor who uses deep learning methods to forecast stock market excess returns. In a two-asset allocation problem, deep neural networks -- both feedforward and long short-term memory (LSTM)…
Accurate covariance forecasting is central to portfolio allocation, risk management, and asset pricing, yet many existing methods struggle at medium-term horizons, where shifting market regimes and slower dynamics predominate. We propose a…
This paper introduces a consistent estimator and rate of convergence for the precision matrix of asset returns in large portfolios using a non-linear factor model within the deep learning framework. Our estimator remains valid even in low…
Portfolio optimization in real-world financial markets is notoriously difficult due to non-stationarity, noisy data, and high transaction costs. Standard predict-then-optimize methods first forecast returns and then solve for weights,…