Multi-period portfolio optimization: Translation of autocorrelation risk to excess variance

Byung Geun Choi, Napat Rujeerapaiboon, Ruiwei Jiang

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

Growth-optimal portfolios are guaranteed to accumulate higher wealth than any other investment strategy in the long run. However, they tend to be risky in the short term. For serially uncorrelated markets, similar portfolios with more robust guarantees have been recently proposed. This paper extends these robust portfolios by accommodating non-zero autocorrelations that may reflect investors’ beliefs about market movements. Moreover, we prove that the risk incurred by such autocorrelations can be absorbed by modifying the covariance matrix of asset returns.

Original languageEnglish (US)
Pages (from-to)801-807
Number of pages7
JournalOperations Research Letters
Volume44
Issue number6
DOIs
StatePublished - Nov 1 2016

Keywords

  • Portfolio optimization
  • Robust optimization
  • Second-order cone programming
  • Semidefinite programming

ASJC Scopus subject areas

  • Software
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering
  • Applied Mathematics

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