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…
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48 results for “portfolio diversification”
Paper introduces lexical ratio to measure portfolio diversification.
problem Traditional diversification metrics overlook non-numerical relationships.
method Uses textual data to capture diversification dimensions through entropy-based insights.
result Lexical ratio (LR) outperforms traditional metrics in optimizing portfolio returns.
The paper proposes a new approach to portfolio selection that maximizes diversification and return.
problem Maximizing diversification and return in portfolio selection.
method A bi-objective model that maximizes a diversification measure and portfolio expected return.
result The return-diversification approach outperforms strategies based on diversification or classical risk-return approaches.
A new portfolio method using quantum mechanics improves risk diversification.
problem Improving risk-based portfolio construction methods for multi-asset portfolios.
method Schrödinger principal component analysis applied to extract common factors from asset fluctuations.
result The proposed method outperforms conventional risk parity and other risk diversification methods.
Financial instability transition under heterogeneous investments and portfolio diversificationq-fin.RM
Investment diversification affects financial stability, depending on network connectivity.
problem Analyzing stability of financial networks with diversified portfolios.
method Random matrix dynamical model with portfolio rebalancing, considering heterogeneity and diversification effects.
result Stability/instability transition depends on the largest eigenvalue of the random matrix.
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…
New methods show sparse portfolios offer no advantage over mean-variance in diversification.
problem Investment diversification and risk management with sparse portfolios.
method Developed and implemented a new estimation procedure for sparse second-order stochastic spanning using a greedy algorithm and Linear Programming.
result No benefit from expanding a sparse opportunity set beyond 45 assets; optimal sparse portfolio reduces tail risk.
Investing with Cryptocurrencies -- evaluating their potential for portfolio allocation strategiesq-fin.PM
Investing in cryptocurrencies can improve portfolio risk-return profile, especially with diversification strategies.
problem Investing in cryptocurrencies and evaluating their potential for portfolio allocation strategies.
method Investigated different types of investors, various portfolio construction rules, and incorporated liquidity constraints.
result Cryptocurrencies can improve the risk-return profile of portfolios, especially with diversification strategies.
Investigates diversification quotient based on VaR and ES for portfolio models.
problem Quantifying diversification of portfolios using VaR and ES.
method Introduced and analyzed DQ based on VaR and ES for elliptical and MRV distributions.
result Explicit formulas and portfolio optimization problems for VaR and ES DQ are derived.
New risk measures improve portfolio diversification and stability.
problem Concentration risk in traditional portfolio optimization methods.
method Equal-correlation portfolio strategy with mathematical optimization.
result Improved risk diversification and stable returns.
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…
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…
Defines diversification as a binary relationship between financial portfolios.
problem Defines diversification in a new binary relationship for financial portfolios.
method Proposes a new definition of diversification based on convex linear combinations and second order stochastic dominance.
result The proposed definition coincides with second order stochastic dominance.
In this study, we have investigated empirically the effects of market properties on the degree of diversification of investment weights among stocks in a portfolio. The weights of stocks within a portfolio were determined on the basis of Markowitz's portfolio theory. We identified that there was a negative relationship…
The study revisits portfolio diversification by relaxing assumptions for skewed, multi-regime, and leptokurtic asset returns.
problem Underestimation of risk in portfolio diversification due to assumptions that are inconsistent with real-world asset returns.
method Calibrated a Markov-modulated Levy process model to equity market data to demonstrate the merits of the approach.
result The calibrated models effectively match empirical moments and show the importance of relaxing assumptions in portfolio diversification.
New DQ based on expectiles improves portfolio diversification.
problem Improving diversification in financial portfolios.
method Diversification quotient based on expectiles, offering simple formulas and pseudo-convexity.
result The expectile-based DQ is efficient and effective in portfolio optimization.
This paper improves the Diversification Quotient (DQ) for better risk management.
problem Improving portfolio diversification measurement.
method Empirical estimation of DQ using VaR and ES, with asymptotic properties verified.
result Empirical DQ estimators are more robust and have better asymptotic properties.
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…
Optimizes portfolios with utility theory, diversification, and leverage.
problem Finding optimal portfolio allocation strategies.
method Utility theory, exponential and logarithmic utilities, compound probability distributions, maximum expected utility, generalized mean-variance.
result Enhanced portfolio allocation strategies with natural explanations.
Cryptocurrencies have heavy-tailed return distributions, requiring diversification.
problem Cryptocurrency returns do not follow Gaussian distributions.
method Applied econophysics and entropy measures to analyze returns.
result Portfolio diversification reduces return uncertainty.
Study on diversifying equity portfolios during financial crises and stability.
problem Determining the effectiveness of diversification strategies during financial crises and stability.
method Analysis of 20 years of US stock price data, including GFC and COVID-19 crashes, using eigenvalues, graph-theoretic diagnostics, and hierarchical clustering.
result During financial crises, diversification via sector-based portfolios is ineffective, while during stability, 30-40 stocks provide sufficient diversification.
Investigates how diversification preferences relate to risk attitudes.
problem Connecting diversification preferences to risk attitudes.
method Analyzes diversification preferences for various pairs of risks under different conditions.
result Diversification preferences for certain pairs of risks imply specific levels of risk aversion.
Optimizes portfolios by identifying causal drivers of diversification.
problem Achieving efficient portfolio optimization based on asset and diversification dynamics.
method Commonality Principle, Reichenbach Common Cause Principle, conformal maps, Bayesian networks, correlation-based algorithms, neural networks, SDEs.
result Optimal portfolio diversification achieved through causal methodologies and sensitivity forecasting.
Investor skill levels affect optimal portfolio size, study shows.
problem Optimal portfolio size for different skill levels of investors.
method Mathematical methods to study annual and continuous portfolio diversification, regression analysis.
result Strong investors should hold concentrated portfolios, poor investors should hold diversified portfolios.
Risk reduction and Diversification within Markowitz's Mean-Variance Model: Theoretical Revisitq-fin.PM
The conventional wisdom of mean-variance (MV) portfolio theory asserts that the nature of the relationship between risk and diversification is a decreasing asymptotic function, with the asymptote approximating the level of portfolio systematic risk or undiversifiable risk. This literature assumes that investors hold an…
Clusters of crypto assets by path signature improve diversification and reduce fees.
problem Building diversified portfolios of volatile cryptocurrencies.
method Clustering digital assets using path signatures to identify similar behavior patterns.
result Optimal portfolios outperform unfiltered ones, reducing transaction fees.
Unified framework for portfolio optimization using multiple hypotheses.
problem Risk diversification in portfolio allocation.
method Structured ensemble learning approach with diversity control.
result Structured ensembles link predictor diversity to risk 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…
Investigates if adding cryptocurrencies to German portfolios diversifies better, finding mixed results.
problem Improving diversification in German investor portfolios using cryptocurrencies.
method Portfolio analysis with descriptive statistics, graphical methods, and econometric spanning tests, using a customized EWCI.
result Cryptocurrencies can improve diversification in some windows but not as a normal case.
A new diversification measure DQ derived from risk measures addresses limitations of existing indices.
problem Limitations of existing diversification indices in capturing tail heaviness and common shocks.
method DQs are defined based on a parametric family of risk measures, satisfying six axioms of diversification.
result DQs can properly capture tail heaviness and common shocks, improving portfolio selection.
Paper introduces Arte-Blue Chip Index for diversifying portfolios with art investments.
problem Evaluating blue-chip art as a viable asset class for diversification.
method Developed Arte-Blue Chip Index tracking top-performing artists over 24 years.
result 20% allocation of blue-chip art in a diversified portfolio increases risk-adjusted returns by 20%.
Power-law Portfoliosq-fin.PM
Power-law portfolios improve diversification by scaling weights sub-linearly.
problem Optimization methods struggle with unstable pair correlations and non-Gaussian risk measures.
method Construct portfolios with penalty proportional to arbitrary order moment of returns, leading to sub-linear weight scaling.
result Infinite order power-law portfolios are perfectly diversified, improving diversification over Kelly portfolios.
Diversification improves profits for heavy-tailed investments.
problem Investment portfolios of Pareto-distributed returns.
method Stochastic dominance and majorization order.
result Diversification increases first-order stochastic dominance for heavy-tailed returns.
When assets are correlated, benefits of investment diversification are reduced. To measure the influence of correlations on investment performance, a new quantity - the effective portfolio size - is proposed and investigated in both artificial and real situations. We show that in most cases, the effective portfolio siz…
New formula for portfolio risk management using conditional PDEs.
problem Optimal diversification and risk management of portfolios.
method Closed-form formula for conditional probability, Gaussian copulas, conditional risk-neutral PDE.
result Dynamic monitoring of portfolio volatilities and weights from PDEs.
RPS uses graph-based representation learning for better portfolio optimization.
problem Improving portfolio optimization with better returns and lower risks.
method RPS redefines the distance matrix of financial assets using Representation Learning and Clustering algorithms.
result RPS proposes a heuristic to select closer to the optimal subset of assets.
Collective dynamics, diversification and optimal portfolio construction for cryptocurrenciesq-fin.ST
Investigates cryptocurrency maturity through collective dynamics and diversification.
problem Determining if cryptocurrency market exhibits similar mathematical properties to equity market.
method Adjusts focus to retail cryptocurrency investors' behavioral patterns, contrasting with equity market.
result Identifies ideal portfolio size and spread across cryptocurrencies, revealing signatures of maturity.
A new portfolio method uses NMF for risk budgeting, outperforming classical methods.
problem Portfolio diversification and risk management in crypto and traditional assets.
method Risk factor budgeting using convex Non-negative Matrix Factorization (NMF).
result Our method outperforms classical portfolio allocations in diversification and risk profile.
New study shows diversification can increase risk for heavy-tailed losses.
problem Diversification can increase tail risk for heavy-tailed losses.
method Comparison of diversified portfolio to a 'one-basket' benchmark.
result Diversified portfolio has larger tail probabilities than a 'one-basket' benchmark for all thresholds.
Diversification increases systemic risk, contrary to belief.
problem Systemic risk due to diversification at banks.
method Examined diversification's impact on joint default probability and systemic risk using VaR.
result Diversification reduces individual and systemic risk, contrary to common belief.
Paper models cloud outages for cyber insurance stress-testing.
problem Cyber insurance portfolios' vulnerability to simultaneous cloud outages.
method Modeling and calibrating cloud-outage scenarios, measuring diversification.
result Cloud-outage diversification can protect against accumulation risk.
The paper develops diverse risk models for US stock portfolios.
problem Maximizing profits while minimizing risk in stock markets.
method Various high-dimensional risk models and investment strategies tested.
result Out-of-sample tests show improved portfolio performance.
This paper explores portfolio management strategies to maximize alpha and minimize beta.
problem Maximizing returns while minimizing risk in investment portfolios.
method Examines asset allocation, diversification, active management, and risk management strategies.
result Combining these strategies optimizes portfolio performance.
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…
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…
Study compares optimal vs. naive diversification in crypto markets, finds time-varying moments improve performance.
problem Optimizing portfolio construction in volatile crypto markets.
method Examines time-varying moments and transaction costs, incorporates turnover penalty.
result Time-varying moment estimators outperform conventional estimators in practical portfolio construction.
Can Metropolitan Housing Risk be Diversified? A Cautionary Tale from the Recent Boom and Bustq-fin.PM
Geographic diversification is fundamental to risk mitigation among investors and insurers of housing, mortgages, and mortgage-related derivatives. To characterize diversification potential, we provide estimates of integration, spatial correlation, and contagion among US metropolitan housing markets. Results reveal a hi…
New model recommends stocks considering individual preferences and diversification.
problem Inaccurate stock price predictions and ignoring investment theories.
method Portfolio Temporal Graph Network Recommender (PfoTGNRec) incorporating diversification-enhancing sampling.
result PfoTGNRec outperforms state-of-the-art models in real-world data.