13,576 research outputs found

    Tracking Error and Active Portfolio Management

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    Persistent bear market conditions have led to a shift of focus in the tracking error literature. Until recently the portfolio allocation literature focused on tracking error minimization as a consequence of passive benckmark management under portfolio weights, transaction costs and short selling constraints. Abysmal benchmark performance shifted the literature's focus towards active portfolio strategies that aim at beating the benchmark while keeping tracking error within acceptable bounds. We investigate an active (dynamic) portfolio allocation strategy that exploits the predictability in the conditional variance-covariance matrix of asset returns. To illustrate our procedure we use Jorion's (2002) tracking error frontier methodology. We apply our model to a representative portfolio of Australian stocks over the period January 1999 through November 2002.

    Averting HIV Infections in New York City: A Modeling Approach Estimating the Future Impact of Additional Behavioral and Biomedical HIV Prevention Strategies

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    Background:New York City (NYC) remains an epicenter of the HIV epidemic in the United States. Given the variety of evidence-based HIV prevention strategies available and the significant resources required to implement each of them, comparative studies are needed to identify how to maximize the number of HIV cases prevented most economically.Methods:A new model of HIV disease transmission was developed integrating information from a previously validated micro-simulation HIV disease progression model. Specification and parameterization of the model and its inputs, including the intervention portfolio, intervention effects and costs were conducted through a collaborative process between the academic modeling team and the NYC Department of Health and Mental Hygiene. The model projects the impact of different prevention strategies, or portfolios of prevention strategies, on the HIV epidemic in NYC.Results:Ten unique interventions were able to provide a prevention benefit at an annual program cost of less than 360,000,thethresholdforconsiderationasacostsavingintervention(becauseofoffsetsbyfutureHIVtreatmentcostsaverted).Anoptimizedportfolioofthesespecificinterventionscouldresultinuptoa34360,000, the threshold for consideration as a cost-saving intervention (because of offsets by future HIV treatment costs averted). An optimized portfolio of these specific interventions could result in up to a 34% reduction in new HIV infections over the next 20 years. The cost-per-infection averted of the portfolio was estimated to be 106,378; the total cost was in excess of 2billion(overthe20yearperiod,orapproximately2 billion (over the 20 year period, or approximately 100 million per year, on average). The cost-savings of prevented infections was estimated at more than 5billion(orapproximately5 billion (or approximately 250 million per year, on average).Conclusions:Optimal implementation of a portfolio of evidence-based interventions can have a substantial, favorable impact on the ongoing HIV epidemic in NYC and provide future cost-saving despite significant initial costs. © 2013 Kessler et al

    How do Regimes Affect Asset Allocation?

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    International equity returns are characterized by episodes of high volatility and unusually high correlations coinciding with bear markets. We develop models of asset returns that match these patterns and use them in asset allocation. First, the presence of regimes with different correlations and expected returns is difficult to exploit within a framework focused on global equities. Nevertheless, for all-equity portfolios, a regime-switching strategy dominates static strategies out-of-sample. Second, substantial value is added when an investor chooses between cash, bonds and equity investments. When a persistent bear market hits, the investor switches primarily to cash. There are large market timing benefits because the bear market regimes tend to coincide with periods of relatively high interest rates.

    Compare the out-of-sample performance of mean-variance optimization relative to equally weighted or naîve 1/N portfolio

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    Masteroppgave i finansiering og investering - Nord universitet 202

    Regularizing Portfolio Optimization

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    The optimization of large portfolios displays an inherent instability to estimation error. This poses a fundamental problem, because solutions that are not stable under sample fluctuations may look optimal for a given sample, but are, in effect, very far from optimal with respect to the average risk. In this paper, we approach the problem from the point of view of statistical learning theory. The occurrence of the instability is intimately related to over-fitting which can be avoided using known regularization methods. We show how regularized portfolio optimization with the expected shortfall as a risk measure is related to support vector regression. The budget constraint dictates a modification. We present the resulting optimization problem and discuss the solution. The L2 norm of the weight vector is used as a regularizer, which corresponds to a diversification "pressure". This means that diversification, besides counteracting downward fluctuations in some assets by upward fluctuations in others, is also crucial because it improves the stability of the solution. The approach we provide here allows for the simultaneous treatment of optimization and diversification in one framework that enables the investor to trade-off between the two, depending on the size of the available data set

    Stock Market Portfolio Management: A Walk-through

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    Stock market portfolio management has remained successful in drawing attention of number of researchers from the fields of computer science, finance and mathematics all around the world since years. Successfully managing stock market portfolio is the prime concern for investors and fund managers in the financial markets. This paper is aimed to provide a walk-through to the stock market portfolio management. This paper deals with questions like what is stock market portfolio, how to manage it, what are the objectives behind managing it, what are the challenges in managing it. As each coin has two sides, each portfolio has two elements – risk and return. Regarding this, Markowitz’s Modern Portfolio Theory, or Risk-Return Model, to manage portfolio is analyzed in detail along with its criticisms, efficient frontier, and suggested state-of-the-art enhancements in terms of various constraints and risk measures. This paper also discusses other models to manage stock market portfolio such as Capital Asset Pricing Model (CAPM) and Arbitrage Pricing Theory (APT) Model. DOI: 10.17762/ijritcc2321-8169.150613

    Efficient Frontier for Robust Higher-order Moment Portfolio Selection

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    This article proposes a non-parametric portfolio selection criterion for the static asset allocation problem in a robust higher-moment framework. Adopting the Shortage Function approach, we generalize the multi-objective optimization technique in a four-dimensional space using L-moments, and focus on various illustrations of a four-dimensional set of the first four L-moment primal efficient portfolios. our empirical findings, using a large European stock database, mainly rediscover the earlier works by Jean (1973) and Ingersoll (1975), regarding the shape of the extended higher-order moment efficient frontier, and confirm the seminal prediction by Levy and Markowitz (1979) about the accuracy of the mean-variance criterion.Efficient frontier, portfolio selection, robust higher L-moments, shortage function, goal attainment application.
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