Nonparametric nearest neighbor based empirical portfolio selection strategies

Györfi László, Frederic Udina and Walk Harro
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Walk Harro: Universität Stuttgart, Institute of Stochastics and Applications, Stuttgart, Deutschland

Statistics & Risk Modeling, 2008, vol. 26, issue 2, 145-157

Abstract: In recent years optimal portfolio selection strategies for sequential investment have been shown to exist. Although their asymptotical optimality is well established, finite sample properties do need the adjustment of parameters that depend on dimensionality and scale. In this paper we introduce some nearest neighbor based portfolio selectors that solve these problems, and we show that they are also log-optimal for the very general class of stationary and ergodic random processes. The newly proposed algorithm shows very good finite-horizon performance when applied to different markets with different dimensionality or scales without any change: we see it as a very robust strategy.

Keywords: sequential investment; universally consistent portfolios; nearest neighaor estimation (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:bpj:strimo:v:26:y:2008:i:2:p:145-157:n:5

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DOI: 10.1524/stnd.2008.0917

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