Portfolio Optimization

We build a state-of-the-art dynamic model of private asset allocation that considers five key features of private asset markets: (1) the illiquid nature of private assets, (2) timing lags between capital commitments, capital calls, and eventual distributions, (3) time-varying business cycle conditio

We extend the classical mean-variance (MV) framework and propose a robust and sparse portfolio selection model incorporating an ellipsoidal uncertainty set to reduce the impact of estimation errors and fixed transaction costs to penalize over-diversification. In the literature, the MV model under fi

Artificial intelligence is transforming financial investment decision-making frameworks, with deep reinforcement learning demonstrating substantial potential in robo-advisory applications. This paper addresses the limitations of traditional portfolio optimization methods in dynamic asset weight adju

Frazzini and Pedersen (2014) Betting Against Beta (BAB) factor is based on the idea that high beta assets trade at a premium and low beta assets trade at a discount due to investor funding constraints. However, as argued by Campbell and Vuolteenaho (2004), beta comes in “good” and “bad” varieties. W

Solving large-scale robust portfolio optimization problems is challenging due to the high computational demands associated with an increasing number of assets, the amount of data considered, and market uncertainty. To address this issue, we propose an extended supporting hyperplane approximation app

This article describes the methods that achieved 4th and 6th place in the forecasting and investment challenges, respectively, of the M6 competition, ultimately securing the 1st place in the overall duathlon ranking. In the forecasting challenge, we tested a novel meta-learning model that utilizes h

This article introduces a novel hybrid regime identification-forecasting framework designed to enhance multi-asset portfolio construction by integrating asset-specific regime forecasts. Unlike traditional approaches that focus on broad economic regimes affecting the entire asset universe, our framew

The measure of portfolio risk is an important input of the Markowitz framework. In this study, we explored various methods to obtain a robust covariance estimators that are less susceptible to financial data noise. We evaluated the performance of large-cap portfolio using various forms of Ledoit Shr

In quantitative investment, constructing characteristic-sorted portfolios is a crucial strategy for asset allocation. Traditional methods transform raw stock data of varying frequencies into predictive characteristic factors for asset sorting, often requiring extensive manual design and misalignment

We develop and implement methods for determining whether relaxing sparsity constraints on portfolios improves the investment opportunity set for risk-averse investors. We formulate a new estimation procedure for sparse second-order stochastic spanning based on a greedy algorithm and Linear Programmi

In high-dimensional data analysis, such as financial index tracking or biomedical applications, it is crucial to select the few relevant variables while maintaining control over the false discovery rate (FDR). In these applications, strong dependencies often exist among the variables (e.g., stock re

Portfolio managers’ orders trade off return and trading cost predictions. Return predictions rely on alpha models, whereas price impact models quantify trading costs. This paper studies what happens when trades are based on an incorrect price impact model, so that the portfolio either over- or under

Following the idea of Bayesian learning via Gaussian mixture model, we organically combine the backward-looking information contained in the historical data and the forward-looking information implied by the market portfolio, which is affected by heterogeneous expectations and noisy trading behavior

Turning points are the Achilles’ heel of time-series momentum portfolios. Slow signals fail to react quickly to changes in trend while fast signals are often fa

Financial time series forecasting is central to trading, portfolio optimization, and risk management, yet it remains challenging due to noisy, non-stationary, and heterogeneous data. Recent advances in time series foundation models (TSFMs), inspired by large language models, offer a new paradigm for

The Average Oracle, a simple and very fast covariance filtering method, is shown to yield superior Sharpe ratios than the current state-of-the-art (and complex) methods, Dynamic Conditional Covariance coupled to Non-Linear Shrinkage (DCC+NLS). We pit all the known variants of DCC+NLS (quadratic shri

This study evaluates the reliability and investment consequences of scenarios from a specified time-series generative adversarial network (TimeGAN) in Rachev-ratio portfolio allocation. Using 12 exchange-traded funds, we compare historical, replacement and hybrid policies across five training seeds

When developers change one component of an agent, such as its controller, a learned model or its verifier, they usually judge the change by an aggregate task score. That score cannot tell whether improvement was attainable, which component lost value, or what the agent’s own checks certify. We intro

We develop Entropic Value-at-Risk (EVaR) parity for tempered stable returns. EVaR-based inverse risk parity (IRP) and equal risk contribution (ERC) portfolios are constructed using multivariate normal tempered stable models and independent component analysis with tempered stable components. We deriv

We propose an explainable regime-aware portfolio construction framework based on a strictly causal Wasserstein Hidden Markov Model. The model combines rolling Gaussian HMM inference with predictive model-order selection and template-based identity tracking using the 2-Wasserstein distance between Ga