cicyt UNIZAR
Full-text links:

Download:

Current browse context:

q-fin.PM

Change to browse by:

References & Citations

Bookmark

(what is this?)
CiteULike logo BibSonomy logo Mendeley logo del.icio.us logo Digg logo Reddit logo ScienceWISE logo

Quantitative Finance > Portfolio Management

Title: Mean Reverting Portfolios via Penalized OU-Likelihood Estimation

Abstract: We study an optimization-based approach to con- struct a mean-reverting portfolio of assets. Our objectives are threefold: (1) design a portfolio that is well-represented by an Ornstein-Uhlenbeck process with parameters estimated by maximum likelihood, (2) select portfolios with desirable characteristics of high mean reversion and low variance, and (3) select a parsimonious portfolio, i.e. find a small subset of a larger universe of assets that can be used for long and short positions. We present the full problem formulation, a specialized algorithm that exploits partial minimization, and numerical examples using both simulated and empirical price data.
Comments: 7 pages, 6 figures
Subjects: Portfolio Management (q-fin.PM); Optimization and Control (math.OC); Machine Learning (stat.ML)
MSC classes: 91G60, 90C30, 65K10
Cite as: arXiv:1803.06460 [q-fin.PM]
  (or arXiv:1803.06460v1 [q-fin.PM] for this version)

Submission history

From: Aleksandr Aravkin [view email]
[v1] Sat, 17 Mar 2018 04:36:27 GMT (2498kb,D)