 Nonstationary Optimization Approach for Finding Universal PortfoliosA Gaivoronski and Fabio Stella () MPRA Paper from University Library of Munich, Germany Abstract: The definition of universal portfolio was introduced in the nancial literature in order to describe the class of portfolios which are constructed directly from the available observations of the stocks behavior without any assumptions about their statistical properties. Cover has shown that one can construct such portfolio using only observations of the past stock prices which generates the same asymptotic wealth growth as the best constant rebalanced portfolio which is constructed with the full knowledge of the future stock market behavior. In this paper we construct universal portfolios using totally different set of ideas drawn from nonstationary stochastic optimization. Also our portfolios yield the same asymptotic growth of wealth as the best constant rebalanced portfolio constructed with the perfect knowledge of the future, but they are less demanding computationally. Besides theoretical study, we present computational evidence using data from New York Stock Exchange which shows, among other things, superior performance of portfolios which explicitly take into account possible nonstationary market behavior. Keywords: universal portfolios; constant rebalanced portfolios; portfolio selection (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:21913 Access Statistics for this paper More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.