Related papers: Evaluating Investment Performance: The p-index and…
We perform return interval analysis of 1-min {\em{realized volatility}} defined by the sum of absolute high-frequency intraday returns for the Shanghai Stock Exchange Composite Index (SSEC) and 22 constituent stocks of SSEC. The scaling…
This paper solves the consumption-investment problem under Epstein-Zin preferences on a random horizon. In an incomplete market, we take the random horizon to be a stopping time adapted to the market filtration, generated by all observable,…
In the past 20 years, momentum or trend following strategies have become an established part of the investor toolbox. We introduce a new way of analyzing momentum strategies by looking at the information ratio (IR, average return divided by…
Traditional risk factors like beta, size/value, and momentum often lag behind market dynamics in measuring and predicting stock return volatility. Statistical models like PCA and factor analysis fail to capture hidden nonlinear…
We propose a novel model to achieve superior out-of-sample Sharpe ratios. While most research in asset allocation focuses on estimating the return vector and covariance matrix, the first component of our novel model instead forecasts the…
This study introduces a novel approach to walk-forward optimization by parameterizing the lengths of training and testing windows. We demonstrate that the performance of a trading strategy using the Exponential Moving Average (EMA)…
Parametric Portfolio Policies (PPP) estimate optimal portfolio weights directly as functions of observable signals by maximizing expected utility, bypassing the need to model asset returns and covariances. However, PPP ignores policy risk.…
Universal features in stock markets and their derivative markets are studied by means of probability distributions in internal rates of return on buy and sell transaction pairs. Unlike the stylized facts in log normalized returns, the…
Financial markets can be seen as complex systems that are constantly evolving and sensitive to external disturbance, such as systemic risks and economic instabilities. Analysis of resilient market performance, therefore, becomes useful for…
Mean-reverting behavior of individuals assets is widely known in financial markets. In fact, we can construct a portfolio that has mean-reverting behavior and use it in trading strategies to extract profits. In this paper, we show that we…
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 $Q_\gamma$…
It has been widely observed that capitalization-weighted indexes can be beaten by surprisingly simple, systematic investment strategies. Indeed, in the U.S. stock market, equal-weighted portfolios, random-weighted portfolios, and other…
We use supervised learning to identify factors that predict the cross-section of returns and maximum drawdown for stocks in the US equity market. Our data run from January 1970 to December 2019 and our analysis includes ordinary least…
The construction of an efficient portfolio with a good level of return and minimal risk depends on selecting the optimal combination of stocks. This paper introduces a novel decision-making framework for stock selection based on fractional…
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…
Strategic asset allocation requires an investor to select stocks from a given basket of assets. The perspective of our investor is to maximize risk-adjusted alpha returns relative to a benchmark index. Historical returns are used to provide…
The efficient frontier (EF) is a fundamental resource allocation problem where one has to find an optimal portfolio maximizing a reward at a given level of risk. This optimal solution is traditionally found by solving a convex optimization…
Continued interest in sustainable investing calls for an axiomatic approach to measures of risk and reward that focus not only on financial returns, but also on measures of environmental and social sustainability, i.e. environmental,…
This paper introduces a novel methodology for index return forecasting, blending highly correlated stock prices, advanced deep learning techniques, and intricate factor integration. Departing from conventional cap-weighted approaches, our…
We consider the multi-period portfolio optimization problem with a single asset that can be held long or short. Due to the presence of transaction costs, maximizing the immediate reward at each period may prove detrimental, as frequent…