Related papers: Evaluating Investment Performance: The p-index and…
We propose a new set of stylized facts quantifying the structure of financial markets. The key idea is to study the combined structure of both investment strategies and prices in order to open a qualitatively new level of understanding of…
Quantitative Investment, built on the solid foundation of robust financial theories, is at the center stage in investment industry today. The essence of quantitative investment is the multi-factor model, which explains the relationship…
The trade off between risks and returns gives rise to multi-criteria optimisation problems that are well understood in finance, efficient frontiers being the tool to navigate their set of optimal solutions. Motivated by the recent advances…
Given the return series for a set of instruments, a \emph{trading strategy} is a switching function that transfers wealth from one instrument to another at specified times. We present efficient algorithms for constructing (ex-post) trading…
This paper aims at developing a new method by which to build a data-driven portfolio featuring a target risk-return. We first present a comparative study of recurrent neural network models (RNNs), including a simple RNN, long short-term…
Counterintuitively, the S&P 500 Index rose between January 1, 2022, and December 29, 2023, while exchange-traded funds (ETFs) seeking to deliver 2x and 3x daily returns of the index delivered substantially negative returns. Roughly…
In portfolio optimization problems, the minimum expected investment risk is not always smaller than the expected minimal investment risk. That is, using a well-known approach from operations research, it is possible to derive a strategy…
This paper considers finitely many investors who perform mean-variance portfolio selection under relative performance criteria. That is, each investor is concerned about not only her terminal wealth, but how it compares to the average…
Using daily returns of the S&P 500 stocks from 2001 to 2011, we perform a backtesting study of the portfolio optimization strategy based on the extreme risk index (ERI). This method uses multivariate extreme value theory to minimize the…
We propose a novel asset allocation model using a Markov process of states defined by clustered efficient frontier coefficients. While most research in Markov models of the market characterize regimes using return and volatility, we instead…
This paper establishes bounds on the predictive performance of empirical risk minimization for principal component regression. Our analysis is nonparametric, in the sense that the relation between the prediction target and the predictors is…
Asynchronous trading in high-frequency financial markets introduces significant biases into econometric analysis, distorting risk estimates and leading to suboptimal portfolio decisions. Existing synchronization methods, such as 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…
We consider a stochastic model of investment on an asset of a stock market for a prudent investor. She decides to buy permanent goods with a fraction $\a$ of the maximum amount of money owned in her life in order that her economic level…
Systematic investment strategies are exposed to a subtle but pervasive vulnerability: the progressive erosion of their effectiveness as market regimes change. Traditional risk measures, designed to capture volatility or drawdowns, overlook…
In this paper we provide compelling evidence of cyclical mean reversion and multiperiod stock return predictability over horizons of about 30 years with a half-life of about 15 years. This implies that the US stock market follows a…
This paper studies long term investing by an investor that maximizes either expected utility from terminal wealth or from consumption. We introduce the concepts of a generalized stochastic discount factor (SDF) and of the minimum price to…
We uncover a large and significant low-minus-high rank effect for commodities across two centuries. There is nothing anomalous about this anomaly, nor is it clear how it can be arbitraged away. Using nonparametric econometric methods, we…
We consider the infinite-horizon discounted optimal control problem formalized by Markov Decision Processes. We focus on several approximate variations of the Policy Iteration algorithm: Approximate Policy Iteration, Conservative Policy…
We consider the problem of optimal portfolio selection under forward investment performance criteria in an incomplete market. The dynamics of the prices of the traded assets depend on a pair of stochastic factors, namely, a slow factor…