The idiosyncratic (microscopic) and systemic (macroscopic) components of market structure have been shown to be responsible for the departure of the optimal mean-variance allocation from the heuristic 'equally-weighted' portfolio. In this paper, we exploit clustering techniques derived from...

Recently, consistent measures of the ex-post covariation of financial assets based on noisy high-frequency data have been proposed. A related strand of literature focuses on dynamic models and covariance forecasting for high-frequency data based covariance measures. The aim of this paper is to...

Empirical evidence suggests that asset returns correlate more strongly in bear markets than conventional correlation estimates imply. We propose a method for determining complete tail-correlation matrices based on Value-at-Risk (VaR) estimates. We demonstrate how to obtain more efficient...

Most socially responsible investment funds combine a sustainability objective with a tracking error constraint. We characterize the impact of a sustainability constraint on the mean-tracking error efficient frontier and illustrate this on a universe of US stocks for the period 2003–2010.