Multi-Period Portfolio Optimization using Model Predictive Control with Mean-Variance and Risk Parity Frameworks

Xiaoyue Li, A. Sinem Uysal and John M. Mulvey

Papers from arXiv.org

Abstract: We employ model predictive control for a multi-period portfolio optimization problem. In addition to the mean-variance objective, we construct a portfolio whose allocation is given by model predictive control with a risk-parity objective, and provide a successive convex program algorithm that provides 30 times faster and robust solutions in the experiments. Computational results on the multi-asset universe show that multi-period models perform better than their single period counterparts in out-of-sample period, 2006-2020. The out-of-sample risk-adjusted performance of both mean-variance and risk-parity formulations beat the fix-mix benchmark, and achieve Sharpe ratio of 0.64 and 0.97, respectively.

Date: 2021-03
New Economics Papers: this item is included in nep-cmp, nep-fmk and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://arxiv.org/pdf/2103.10813 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:2103.10813

Access Statistics for this paper

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