Dynamic Portfolio Allocation in High Dimensions using Sparse Risk Factors
We propose a fast and flexible method to scale multivariate return volatility predictions up to high-dimensions using a dynamic risk factor model. Our approach increases parsimony via time-varying sparsity on factor loadings and is able to sequentially learn the use of constant or time-varying parameters and volatilities. We show in a dynamic portfolio allocation problem with 452 stocks from the S&P 500 index that our dynamic risk factor model is able to produce more stable and sparse predictions, achieving not just considerable portfolio performance improvements but also higher utility gains for the mean-variance investor compared to the traditional Wishart benchmark and the passive investment on the market index.
Code (0)
등록된 구현이 없습니다.
Tasks
Vocal Bursts Intensity PredictionSimilar Papers 제목 키워드 기반
A Basket Half Full: Sparse Portfolios
The existing approaches to sparse wealth allocations (1) are limited to low-dimensional setup when the number of assets is less than the sample size; (2) lack theoretical analysis of sparse wealth allocations and their i…
Navigating Complexity: Constrained Portfolio Analysis in High Dimensions with Tracking Error and Weight Constraints
This paper analyzes the statistical properties of constrained portfolio formation in a high dimensional portfolio with a large number of assets. Namely, we consider portfolios with tracking error constraints, portfolios …
A dynamic conditional approach to portfolio weights forecasting
We build the time series of optimal realized portfolio weights from high-frequency data and we suggest a novel Dynamic Conditional Weights (DCW) model for their dynamics. DCW is benchmarked against popular model-based an…
Time SeriesTime Series AnalysisOnflow: an online portfolio allocation algorithm
We introduce Onflow, a reinforcement learning technique that enables online optimization of portfolio allocation policies based on gradient flows. We devise dynamic allocations of an investment portfolio to maximize its …
Stochastic OptimizationDynamic Factor Allocation Leveraging Regime-Switching Signals
This article explores dynamic factor allocation by analyzing the cyclical performance of factors through regime analysis. The authors focus on a U.S. equity investment universe comprising seven long-only indices represen…