scholarly journals An Iterative Approach to Ill-Conditioned Optimal Portfolio Selection

2019 ◽  
Vol 56 (4) ◽  
pp. 773-794 ◽  
Author(s):  
Mårten Gulliksson ◽  
Stepan Mazur
Keyword(s):  
Covariance Matrix ◽  
Portfolio Selection ◽  
Numerical Study ◽  
Asset Returns ◽  
Positive Definite ◽  
Convergence Properties ◽  
Good Convergence ◽  
Optimal Portfolio Selection ◽  
Singular Covariance Matrix ◽  
Better Than

AbstractCovariance matrix of the asset returns plays an important role in the portfolio selection. A number of papers is focused on the case when the covariance matrix is positive definite. In this paper, we consider portfolio selection with a singular covariance matrix. We describe an iterative method based on a second order damped dynamical systems that solves the linear rank-deficient problem approximately. Since the solution is not unique, we suggest one numerical solution that can be chosen from the iterates that balances the size of portfolio and the risk. The numerical study confirms that the method has good convergence properties and gives a solution as good as or better than the solutions that are based on constrained least norm Moore–Penrose, Lasso, and naive equal-weighted approaches. Finally, we complement our result with an empirical study where we analyze a portfolio with actual returns listed in S&P 500 index.

scholarly journals The Effect of Exit Strategy on Optimal Portfolio Selection with Birandom Returns

2013 ◽  
Vol 2013 ◽  
pp. 1-6 ◽  
Author(s):  
Guohua Cao ◽  
Dan Shan
Keyword(s):  
Portfolio Selection ◽  
Stock Return ◽  
Optimal Portfolio ◽  
Exit Strategy ◽  
Hybrid Intelligent Algorithm ◽  
Optimal Portfolio Selection ◽  
Stop Loss ◽  
The Given ◽  
Safety First ◽  
Better Than

The aims of this paper are to use a birandom variable to denote the stock return selected by some recurring technical patterns and to study the effect of exit strategy on optimal portfolio selection with birandom returns. Firstly, we propose a new method to estimate the stock return and use birandom distribution to denote the final stock return which can reflect the features of technical patterns and investors' heterogeneity simultaneously; secondly, we build a birandom safety-first model and design a hybrid intelligent algorithm to help investors make decisions; finally, we innovatively study the effect of exit strategy on the given birandom safety-first model. The results indicate that (1) the exit strategy affects the proportion of portfolio, (2) the performance of taking the exit strategy is better than when the exit strategy is not taken, if the stop-loss point and the stop-profit point are appropriately set, and (3) the investor using the exit strategy become conservative.

scholarly journals Performance of Portfolios Based on the Expected Utility-Entropy Fund Rating Approach

Entropy ◽  
2021 ◽  
Vol 23 (4) ◽  
pp. 481
Author(s):  
Daniel Chiew ◽  
Judy Qiu ◽  
Sirimon Treepongkaruna ◽  
Jiping Yang ◽  
Chenxiao Shi
Keyword(s):  
Mutual Funds ◽  
Portfolio Selection ◽  
Expected Utility ◽  
Decision Model ◽  
Risky Choice ◽  
Numerical Representation ◽  
Better Than ◽  
The Eu

Yang and Qiu proposed and reframed an expected utility–entropy (EU-E) based decision model. Later on, a similar numerical representation for a risky choice was axiomatically developed by Luce et al. under the condition of segregation. Recently, we established a fund rating approach based on the EU-E decision model and Morningstar ratings. In this paper, we apply the approach to US mutual funds and construct portfolios using the best rating funds. Furthermore, we evaluate the performance of the fund ratings based on the EU-E decision model against Morningstar ratings by examining the performance of the three models in portfolio selection. The conclusions show that portfolios constructed using the ratings based on the EU-E models with moderate tradeoff coefficients perform better than those constructed using Morningstar. The conclusion is robust to different rebalancing intervals.

scholarly journals On the optimal control force applied to tuned mass dampers for multi-degree-of-freedom systems

2004 ◽  
Vol 26 (1) ◽  
pp. 1-10
Author(s):  
Nguyen Dong Anh ◽  
Nguyen Chi Sang
Keyword(s):  
Optimal Control ◽  
Numerical Study ◽  
Degree Of Freedom ◽  
Control Force ◽  
Linear Quadratic ◽  
Tuned Mass Dampers ◽  
Coloured Noise ◽  
Optimal Theory ◽  
The One ◽  
Better Than

The design of active TMD for multi-degree-of-freedom systems subjected to second order coloured noise excitation is considered using the linear quadratic optimal theory. A detailed numerical study is carried out for a 2-DOF system. It is shown that the effectiveness of active TMD is better than the one of passive TMD.

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