Portfolio selection with independent component analysis

Asmerilda Hitaj, Lorenzo Mercuri (lorenzo.mercuri@unimi.it) and Edit Rroji

Finance Research Letters, 2015, vol. 15, issue C, 146-159

Abstract: We analyze a methodology for portfolio selection based on the independent component analysis. In this paper parametric and non-parametric approaches are used for capturing the behavior of independent components that generate the distribution of asset returns. Although the setup is quite general, we focus mainly on the numerical issues encountered for parametric models and suggest the inclusion of a penalty function in the optimization problem.

Keywords: Independent components; Portfolio allocation; Infinitely divisible distributions (search for similar items in EconPapers)
JEL-codes: C51 G11 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:15:y:2015:i:c:p:146-159

DOI: 10.1016/j.frl.2015.09.005

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