Online Universal Dirichlet Factor Portfolios
Portfolio Management
2023-11-08 v2 Computational Engineering, Finance, and Science
Mathematical Finance
Abstract
We revisit the online portfolio allocation problem and propose universal portfolios that use factor weighing to produce portfolios that out-perform uniform dirichlet allocation schemes. We show a few analytical results on the lower bounds of portfolio growth when the returns are known to follow a factor model. We also show analytically that factor weighted dirichlet sampled portfolios dominate the wealth generated by uniformly sampled dirichlet portfolios. We corroborate our analytical results with empirical studies on equity markets that are known to be driven by factors.
Cite
@article{arxiv.2308.07763,
title = {Online Universal Dirichlet Factor Portfolios},
author = {Purushottam Parthasarathy and Avinash Bhardwaj and Manjesh K. Hanawal},
journal= {arXiv preprint arXiv:2308.07763},
year = {2023}
}