Related papers: Unwitting Markowitz' Simplification of Portfolio R…
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 study, we have investigated empirically the effects of market properties on the degree of diversification of investment weights among stocks in a portfolio. The weights of stocks within a portfolio were determined on the basis of…
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…
Monotone mean-variance (MMV) utility is the minimal modification of the classical Markowitz utility that respects rational ordering of investment opportunities. This paper provides, for the first time, a complete characterization of optimal…
Since decades, the data science community tries to propose prediction models of financial time series. Yet, driven by the rapid development of information technology and machine intelligence, the velocity of today's information leads to…
In this work, we consider weighted signed network representations of financial markets derived from raw or denoised correlation matrices, and examine how negative edges can be exploited to reduce portfolio risk. We then propose a discrete…
We consider an incomplete market with a nontradable stochastic factor and a continuous time investment problem with an optimality criterion based on monotone mean-variance preferences. We formulate it as a stochastic differential game…
Investment approaches in financial instruments have been varied and often produce unpredictable results. Many investors in the earlier days of investment banking suffered catastrophical losses due to poor strategy and lack of understanding…
Volatility, as a primary indicator of financial risk, forms the foundation of classical frameworks such as Markowitz's Portfolio Theory and the Efficient Market Hypothesis (EMH). However, its conventional use rests on assumptions-most…
The random values and volumes of consecutive trades made at the exchange with shares of security determine its mean, variance, and higher statistical moments. The volume weighted average price (VWAP) is the simplest example of such a…
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 investigate the variety of a portfolio of stocks in normal and extreme days of market activity. We show that the variety carries information about the market activity which is not present in the single-index model and we observe that the…
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…
It has been understood that the "local" existence of the Markowitz' optimal portfolio or the solution to the local-risk minimization problem is guaranteed by some specific mathematical structures on the underlying assets price processes…
In finance industry portfolio construction deals with how to divide the investors' wealth across an asset-classes' menu in order to maximize the investors' gain. Main approaches in use at the present are based on variations of the classical…
Risk management is very important for individual investors or companies. There are many ways to measure the risk of investment. Prices of risky assets vary rapidly and randomly due to the complexity of finance market. Random interval is a…
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 concerns portfolio selection with multiple assets under rough covariance matrix. We investigate the continuous-time Markowitz mean-variance problem for a multivariate class of affine and quadratic Volterra models. In this…
We study Markowitz's mean-variance portfolio selection problem in a continuous-time Black-Scholes market with different borrowing and saving rates. The associated Hamilton-Jacobi-Bellman equation is fully nonlinear. Using a delicate partial…
The volatility characterizes the amplitude of price return fluctuations. It is a central magnitude in finance closely related to the risk of holding a certain asset. Despite its popularity on trading floors, the volatility is unobservable…