Portfolio Optimization Constrained by Performance Attribution

Yuan Hu and W. Brent Lindquist

Papers from arXiv.org

Abstract: This paper investigates performance attribution measures as a basis for constraining portfolio optimization. We employ optimizations that minimize expected tail loss and investigate both asset allocation (AA) and the selection effect (SE) as hard constraints on asset weights. The test portfolio consists of stocks from the Dow Jones Industrial Average index; the benchmark is an equi-weighted portfolio of the same stocks. Performance of the optimized portfolios is judged using comparisons of cumulative price and the risk-measures maximum drawdown, Sharpe ratio, and Rachev ratio. The results suggest a positive role in price and risk-measure performance for the imposition of constraints on AA and SE, with SE constraints producing the larger performance enhancement.

Date: 2021-03
New Economics Papers: this item is included in nep-cwa and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2103.04432 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2103.04432

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators (help@arxiv.org).