Multi-period portfolio optimization: translation of autocorrelation risk to excess variance

DOI10.1016/J.ORL.2016.10.006MaRDI QIDQ1709972zbMATH OpenOpenAlexFDO

Authors Byung-Geun Choi, Napat Rujeerapaiboon, Ruiwei Jiang

Publication date 15 January 2019

Published in Operations Research Letters (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1606.06578

zbMATH Keywords

semidefinite programmingportfolio optimizationrobust optimizationsecond-order cone programming

Mathematics Subject Classification ID

Quadratic programming (90C20) Convex programming (90C25) Portfolio theory (91G10) Semidefinite programming (90C22)

Abstract: Growth-optimal portfolios are guaranteed to accumulate higher wealth than any other investment strategy in the long run. However, they tend to be risky in the short term. For serially uncorrelated markets, similar portfolios with more robust guarantees have been recently proposed. This paper extends these robust portfolios by accommodating non-zero autocorrelations that may reflect investors' beliefs about market movements. Moreover, we prove that the risk incurred by such autocorrelations can be absorbed by modifying the covariance matrix of asset returns.

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Cites work

• scientific article; zbMATH DE number 3179081 (Why is no real title available?)
• Asymptotic optimality and asymptotic equipartiton properties of log- optimum investment
• Distributionally robust joint chance constraints with second-order moment information
• Generalized Chebyshev Bounds via Semidefinite Programming
• On the history of the growth-optimal portfolio
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Cited in

(4)

• Chance-constrained optimization under limited distributional information: a review of reformulations based on sampling and distributional robustness
• Maximizing an equity portfolio excess growth rate: a new form of smart beta strategy?
• CVaR-based robust models for portfolio selection
• Application of portfolio optimization to achieve persistent time series

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