Related papers: The Sherman-Morrison-Markowitz Portfolio
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…
Recent advances in quantum hardware offer new approaches to solve various optimization problems that can be computationally expensive when classical algorithms are employed. We propose a hybrid quantum-classical algorithm to solve a dynamic…
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…
The classical mean-variance framework characterizes portfolio risk solely through return variance and the covariance matrix, implicitly assuming that all relevant sources of risk are captured by second moments. In modern financial markets,…
This paper studies the continuous time mean-variance portfolio selection problem with one kind of non-linear wealth dynamics. To deal the expectation constraint, an auxiliary stochastic control problem is firstly solved by two new…
In this paper, different approaches to portfolio optimization having higher moments such as skewness and kurtosis are classified so that the reader can observe different paradigms and approaches in this field of research which is essential…
We study dynamic optimal portfolio allocation for monotone mean--variance preferences in a general semimartingale model. Armed with new results in this area we revisit the work of Cui, Li, Wang and Zhu (2012, MAFI) and fully characterize…
This paper studies a type of periodic utility maximization for portfolio management in an incomplete market model, where the underlying price diffusion process depends on some external stochastic factors. The portfolio performance is…
In this paper we construct a shrinkage estimator of the global minimum variance (GMV) portfolio by a combination of two techniques: Tikhonov regularization and direct shrinkage of portfolio weights. More specifically, we employ a double…
The Markowitz model is still the cornerstone of modern portfolio theory. In particular, when focusing on the minimum-variance portfolio, the covariance matrix or better its inverse, the so-called precision matrix, is the only input…
We study the Markowitz portfolio selection problem with unknown drift vector in the multidimensional framework. The prior belief on the uncertain expected rate of return is modeled by an arbitrary probability law, and a Bayesian approach…
Several portfolio selection models take into account practical limitations on the number of assets to include and on their weights in the portfolio. We present here a study of the Limited Asset Markowitz (LAM), of the Limited Asset Mean…
In this paper, we tackle the dynamic mean-variance portfolio selection problem in a {\it model-free} manner, based on (generative) diffusion models. We propose using data sampled from the real model $\mathbb P$ (which is unknown) with…
We provide a new theory for nodewise regression when the residuals from a fitted factor model are used. We apply our results to the analysis of the consistency of Sharpe ratio estimators when there are many assets in a portfolio. We allow…
In this paper we derive the exact solution of the multi-period portfolio choice problem for an exponential utility function under return predictability. It is assumed that the asset returns depend on predictable variables and that the joint…
This is a companion paper of [Mixed equilibrium solution of time-inconsistent stochastic LQ problem, arXiv:1802.03032], where general theory has been established to characterize the open-loop equilibrium control, feedback equilibrium…
This paper studies a type of periodic utility maximization problems for portfolio management in incomplete stochastic factor models with convex trading constraints. The portfolio performance is periodically evaluated on the relative ratio…
A cardinality-constrained portfolio caps the number of stocks to be traded across and within groups or sectors. These limitations arise from real-world scenarios faced by fund managers, who are constrained by transaction costs and client…
Portfolio optimization is one of the most studied optimization problems at the intersection of quantum computing and finance. In this work, we develop the first quantum formulation for a portfolio optimization problem with higher-order…
In this paper, we derive the feasibility conditions for the robust counterparts of the uncertain Markowitz model. Our study is based on ellipsoidal, box, polyhedral uncertainty sets and also the uncertainty sets obtained from their…