Equally diversified or equally weighted?
New diversification measure enables construction of equally diversified portfolios
CLICK HERE TO DOWNLOAD THE PDF
Gianluca Fusai, Domenico Mignacca, Andrea Nardon and Ben Human show how to decompose portfolio volatility into undiversified volatility and a diversification component. The authors’ decomposition has a clear statistical interpretation because it relates the diversification component to partial covariances. On this basis, they advocate the construction of an equally diversified portfolio. An empirical analysis illustrates the superior out-of-sample performance of
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Investments
Trading the vol-of-vol risk premium
Applications of the vol-of-vol parameter for cross-asset derivatives are presented
Asset allocation with inverse reinforcement learning
Using reinforcement learning to help replicate asset managers' allocation strategy
Sculpting implied volatility surfaces of illiquid assets
From the stock cumulative distribution function an arbitrage-free volatility surface is derived
Linking performance of vanilla options to the volatility premium
A framework to account for vanilla options' performance in trading strategies is presented
Optimal turnover, liquidity and autocorrelation
A novel optimal execution approach via continuous-time stochastic processes is introduced
Automated market-making for fiat currencies
A framework to exchange fiat currencies on-chain consistently with off-chain prices is presented
Liquidity stress-testing using optimal portfolio liquidation
A methodology to derive liquidation costs and times in OTC markets is proposed
Fat-tailed factors
Independent component analysis is proposed as an alternative to principal component analysis
