Investment strategy due to the minimization of portfolio noise level by observations of coarse-grained entropy

Krzysztof Urbanowicz () and Janusz A. Holyst

Papers from arXiv.org

Abstract: Using a recently developed method of noise level estimation that makes use of properties of the coarse grained-entropy we have analyzed the noise level for the Dow Jones index and a few stocks from the New York Stock Exchange. We have found that the noise level ranges from 40 to 80 percent of the signal variance. The condition of a minimal noise level has been applied to construct optimal portfolios from selected shares. We show that implementation of a corresponding threshold investment strategy leads to positive returns for historical data.

Date: 2004-12
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Published in Physica A 344, 284-288 (2004)

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Journal Article: Investment strategy due to the minimization of portfolio noise level by observations of coarse-grained entropy (2004)
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