Related papers: Markowitz Variance May Vastly Undervalue or Overes…
As the cornerstone of modern portfolio theory, Markowitz's mean-variance optimization is considered a major model adopted in portfolio management. However, due to the difficulty of estimating its parameters, it cannot be applied to all…
The signal-noise ratio of a portfolio of p assets, its expected return divided by its risk, is couched as an estimation problem on the sphere. When the portfolio is built using noisy data, the expected value of the signal-noise ratio is…
We consider an investor facing a classical portfolio problem of optimal investment in a log-Brownian stock and a fixed-interest bond, but constrained to choose portfolio and consumption strategies that reduce a dynamic shortfall risk…
We provided proof here that coefficient of variation (CV) is a direct measure of risk using an equation that has been derived here for the first time. We also presented a method to generate a stock CV based on return that strongly…
We consider the problem of selecting a portfolio of assets that provides the investor a suitable balance of expected return and risk. With respect to the seminal mean-variance model of Markowitz, we consider additional constraints on the…
We extend and test empirically the multifractal model of asset returns based on a multiplicative cascade of volatilities from large to small time scales. The multifractal description of asset fluctuations is generalized into a multivariate…
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…
Designing an optimum portfolio that allocates weights to its constituent stocks in a way that achieves the best trade-off between the return and the risk is a challenging research problem. The classical mean-variance theory of portfolio…
This paper focuses on a dynamic multi-asset mean-variance portfolio selection problem under model uncertainty. We develop a continuous time framework for taking into account ambiguity aversion about both expected return rates and…
We consider the problem of portfolio selection within the classical Markowitz mean-variance framework, reformulated as a constrained least-squares regression problem. We propose to add to the objective function a penalty proportional to the…
This paper defines theoretical lower bounds of uncertainty of observations of macroeconomic variables that depend on statistical moments and correlations of random values and volumes of market trades. Any econometric assessments of…
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…
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…
This paper is devoted to study the optimal portfolio problem. Harry Markowitz's Ph.D. thesis prepared the ground for the mathematical theory of finance. In modern portfolio theory, we typically find asset returns that are modeled by a…
A new methodology has been introduced to clean the correlation matrix of single stocks returns based on a constrained principal component analysis using financial data. Portfolios were introduced, namely "Fundamental Maximum Variance…
The Markowitz mean-variance portfolio optimization model aims to balance expected return and risk when investing. However, there is a significant limitation when solving large portfolio optimization problems efficiently: the large and dense…
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…
In this paper, both dynamic mean-variance portfolio selection problems and dynamic variance hedging problems are discussed under non-Markovian framework. Explicit closed-loop equilibrium strategies of these problems are respectively…
This study delves into the intricate realm of risk evaluation within the domain of specific financial derivatives, notably options. Unlike other financial instruments, like bonds, options are susceptible to broader risks. A distinctive…
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…