Sparse Mean-Variance Portfolios: A Penalized Utility Approach
Statistical Finance
2016-10-05 v4
Abstract
This paper considers mean-variance optimization under uncertainty, specifically when one desires a sparsified set of optimal portfolio weights. From the standpoint of a Bayesian investor, our approach produces a small portfolio from many potential assets while acknowledging uncertainty in asset returns and parameter estimates. We demonstrate the procedure using static and dynamic models for asset returns.
Keywords
Cite
@article{arxiv.1512.02310,
title = {Sparse Mean-Variance Portfolios: A Penalized Utility Approach},
author = {David Puelz and P. Richard Hahn and Carlos M. Carvalho},
journal= {arXiv preprint arXiv:1512.02310},
year = {2016}
}