投资组合管理
In this paper, we revisit the portfolio optimization problems of the minimization/maximization of investment risk under constraints of budget and investment concentration (primal problem) and the maximization/minimization of investment…
A large portfolio of independent returns is optimized under the variance risk measure with a ban on short positions. The no-short selling constraint acts as an asymmetric $\ell_1$ regularizer, setting some of the portfolio weights to zero…
We construct a deep portfolio theory. By building on Markowitz's classic risk-return trade-off, we develop a self-contained four-step routine of encode, calibrate, validate and verify to formulate an automated and general portfolio…
We develop a simple stock selection model to explain why active equity managers tend to underperform a benchmark index. We motivate our model with the empirical observation that the best performing stocks in a broad market index often…
In this paper, we consider the problem of optimization of a portfolio consisting of securities. An investor with an initial capital, is interested in constructing a portfolio of securities. If the prices of securities change, the investor…
For an exponential utility maximizing investment strategy in a Black-Scholes Setting, fixed upper and lower constraints are introduced on the terminal wealth. This is equivalent to combining the optimal strategy with options. The resulting…
We provide further evidence that markets trend on the medium term (months) and mean-revert on the long term (several years). Our results bolster Black's intuition that prices tend to be off roughly by a factor of 2, and take years to…
We give a simple explicit algorithm for building multi-factor risk models. It dramatically reduces the number of or altogether eliminates the risk factors for which the factor covariance matrix needs to be computed. This is achieved via a…
This paper concerns the numerical solution of a fully nonlinear parabolic double obstacle problem arising from a finite portfolio selection with proportional transaction costs. We consider the optimal allocation of wealth among multiple…
In this paper, we propose an innovative investment framework incorporating asset allocation and class diversification oriented specifically for the biotechnology industry. With growing interests and capitalization in multiple biotech…
Kelly betting is a prescription for optimal resource allocation among a set of gambles which are typically repeated in an independent and identically distributed manner. In this setting, there is a large body of literature which includes…
We consider the problem of optimal investment with intermediate consumption in a general semimartingale model of an incomplete market, with preferences being represented by a utility stochastic field. We show that the key conclusions of the…
Sequential portfolio selection has attracted increasing interests in the machine learning and quantitative finance communities in recent years. As a mathematical framework for reinforcement learning policies, the stochastic multi-armed…
This paper defines systematic value investing as an empirical optimization problem. Predictive modeling is introduced as a systematic value investing methodology with dynamic and optimization features. A predictive modeling process is…
We study optimal investment with multiple assets in the presence of small proportional transaction costs. Rather than computing an asymptotically optimal no-trade region, we optimize over suitable trading frequencies. We derive explicit…
We consider a market consisting of one safe and one risky asset, which offer constant investment opportunities. Taking into account both proportional transaction costs and linear price impact, we derive optimal rebalancing policies for…
Recently, our group has published two papers that have received some attention in the finance community. One is about the profitability of trend following strategies over 200 years, the second is about the correlation between the…
We find that when measured in terms of dollar-turnover, and once $\beta$-neutralised and Low-Vol neutralised, the Size Effect is alive and well. With a long term t-stat of $5.1$, the "Cold-Minus-Hot" (CMH) anomaly is certainly not less…
Over the past half-century, the empirical finance community has produced vast literature on the advantages of the equally weighted S\&P 500 portfolio as well as the often overlooked disadvantages of the market capitalization weighted…
We empirically show the superiority of the equally weighted S\&P 500 portfolio over Sharpe's market capitalization weighted S\&P 500 portfolio. We proceed to consider the MaxMedian rule, a non-proprietary rule designed for the investor who…