A locally-built, LLM-digested index of recent arXiv papers in quant finance, geometry/topology, and statistical ML — keyword search served straight from SQLite on this machine.
The paper proposes a new approach to portfolio selection that maximizes diversification and return.
Diversification represents the idea of choosing variety over uniformity. Within the theory of choice, desirability of diversification is axiomatized as preference for a convex combination of choices that are equivalently ranked. This corresponds to the notion of risk aversion when one assumes the von-Neumann-Morgenster…
Investigates diversification quotient based on VaR and ES for portfolio models.
Investigates how diversification preferences relate to risk attitudes.
One of the findings of the recent literature is that the 2008 financial crisis caused reduction in international diversification benefits. To fully understand the possible potential from diversification, we build an empirical model which combines generalised autoregressive score copula functions with high frequency dat…
Study examines diversification of mid-mountain ski tourism.
Diversification improves profits for heavy-tailed investments.
Diversification increases systemic risk, contrary to belief.
Investment diversification affects financial stability, depending on network connectivity.
This paper improves the Diversification Quotient (DQ) for better risk management.
Defines diversification as a binary relationship between financial portfolios.
Oil is perceived as a good diversification tool for stock markets. To fully understand this potential, we propose a new empirical methodology that combines generalized autoregressive score copula functions with high frequency data and allows us to capture and forecast the conditional time-varying joint distribution of …
A new diversification measure DQ derived from risk measures addresses limitations of existing indices.
The study revisits portfolio diversification by relaxing assumptions for skewed, multi-regime, and leptokurtic asset returns.
Paper introduces lexical ratio to measure portfolio diversification.
A widely applied diversification paradigm is the naive diversification choice heuristic. It stipulates that an economic agent allocates equal decision weights to given choice alternatives independent of their individual characteristics. This article provides mathematically and economically sound choice theoretic founda…
Risk diversification is one of the dominant concerns for portfolio managers. Various portfolio constructions have been proposed to minimize the risk of the portfolio under some constrains including expected returns. We propose a portfolio construction method that incorporates the complex valued principal component anal…
New DQ based on expectiles improves portfolio diversification.
Optimizes portfolios with utility theory, diversification, and leverage.
Optimizes portfolios by identifying causal drivers of diversification.
Network theory proved recently to be useful in the quantification of many properties of financial systems. The analysis of the structure of investment portfolios is a major application since their eventual correlation and overlap impact the actual risk diversification by individual investors. We investigate the biparti…
New methods show sparse portfolios offer no advantage over mean-variance in diversification.
This study uses Tsallis entropy to analyze diversification and integration in Italian stock market companies.
The paper explores tail diversification in financial markets using entropy and mutual information.
We investigate a multi-factor extension of the asymptotic single risk factor (ASRF) model that underlies the capital charges of the "Basel II Accord". In this extended model, it is still possible to derive closed-form solutions for the risk contributions to Value-at-Risk and Expected Shortfall. As an application of the…
Cryptocurrency markets exhibit violent, synchronised drawdowns, challenging diversification claims.
We test the hypothesis that interconnections across financial institutions can be explained by a diversification motive. This idea stems from the empirical evidence of the existence of long-term exposures that cannot be explained by a liquidity motive (maturity or currency mismatch). We model endogenous interconnection…
We present four methods of assessing the diversification potential within a stock market, two of these are based on principal component analysis. They were applied to the Australian stock exchange for the years 2000 to 2014 and all show a consistent picture. The potential for diversification declined almost monotonical…
We study the relationship between firms' performance and their technological portfolios using tools borrowed from the complexity science. In particular, we ask whether the accumulation of knowledge and capabilities related to a coherent set of technologies leads firms to experience advantages in terms of productive eff…
In the past decade many researchers have proposed new optimal portfolio selection strategies to show that sophisticated diversification can outperform the naïve 1/N strategy in out-of-sample benchmarks. Providing an updated review of these models since DeMiguel et al. (2009b), I test sixteen strategies across six empir…
Excessive leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be considered independent. Based on the structural framework by Merton (1974), we discuss …
Paper models cloud outages for cyber insurance stress-testing.
A new framework for portfolio diversification is introduced which goes beyond the classical mean-variance approach and portfolio allocation strategies such as risk parity. It is based on a novel concept called portfolio dimensionality that connects diversification to the non-Gaussianity of portfolio returns and can typ…
Diversification return is an incremental return earned by a rebalanced portfolio of assets. The diversification return of a rebalanced portfolio is often incorrectly ascribed to a reduction in variance. We argue that the underlying source of the diversification return is the rebalancing, which forces the investor to se…
Risk-only investment strategies have been growing in popularity as traditional in- vestment strategies have fallen short of return targets over the last decade. However, risk-based investors should be aware of four things. First, theoretical considerations and empirical studies show that apparently dictinct risk-based …
A new portfolio method using quantum mechanics improves risk diversification.
This paper focuses on a dynamic multi-asset mean-variance portfolio selection problem under model uncertainty. We develop a continuous time framework for taking into account ambiguity aversion about both expected return rates and correlation matrix of the assets, and for studying the join effects on portfolio diversifi…
New risk measures improve portfolio diversification and stability.
Study on diversifying equity portfolios during financial crises and stability.
Investing in cryptocurrencies can improve portfolio risk-return profile, especially with diversification strategies.
We consider the problem of risk diversification of -stable heavy tailed risks. We study the behaviour of the aggregated Value-at-Risk, with particular reference to the impact of different tail dependence structures on the limits to diversification. We confirm the large evidence of sub-additivity violations, particul…
Portfolio diversification and active risk management are essential parts of financial analysis which became even more crucial (and questioned) during and after the years of the Global Financial Crisis. We propose a novel approach to portfolio diversification using the information of searched items on Google Trends. The…
New study shows diversification can increase risk for heavy-tailed losses.
Cryptocurrencies have heavy-tailed return distributions, requiring diversification.
In the market place, diversification reduces risk and provides protection against extreme events by ensuring that one is not overly exposed to individual occurrences. We argue that diversification is best measured by characteristics of the combined portfolio of assets and introduce a measure based on the information en…
Optimizes diversification in catastrophe risk pooling using asymptotic analysis.
This paper proposes RDS to improve model diversity in data sampling.
The quantification of diversification benefits due to risk aggregation plays a prominent role in the (regulatory) capital management of large firms within the financial industry. However, the complexity of today's risk landscape makes a quantifiable reduction of risk concentration a challenging task. In the present pap…