We propose a fund allocation strategy for a highly risk-averse investor based on pessimistic decision making to construct portfolios of four major asset classes. Using US data (indexes of stocks, bonds, real estate, and commodities) from January 1990 to December 2010, we find that the proposed...

This paper analyzes the performance of index-based portfolios across developed, emerging, and frontier markets. Besides considering stocks and bonds for portfolio construction, we investigate how investment opportunity sets are enlarged when credit default swaps (CDSs) are added into portfolios...

This paper investigates tactical investment strategies for investors to survive financial crises. Compared with the buy-and-hold strategy, the buy-and-sell strategy is much more effective in mitigating downside risk before, during, and after a crisis by restricting the left-tail volatility of...

The 2015 Paris Agreement is a landmark in limiting emissions and targeting global warming well below 2, preferably 1.5, degrees Celsius compared to pre-industrial levels. In this light, we investigate how to efficiently construct equity portfolios that help mitigating climate change risk but at...

This paper presents the results of an empirical study concerning conventional and socially responsible mutual funds.We apply a sophisticated operations research algorithm embedded in inverse portfolio optimization on financial market data, ESG-scores and CRSP fund data. Due to our results we...

Academic and practitioner research has presented strong evidence in support of the addition of commodity futures contracts to a diversified stock portfolio to enhance the risk-return characteristics of the portfolio. Moreover, it is well documented that diversification among risky assets in a...

Increasing correlation among international equity markets has prompted investors to seek new investment opportunities. To shed light on this issue for U.S. investors, this paper measures economic benefits of international equity diversification using mean-variance and higher-moments frameworks...

Every structure has natural frequencies. Minor shocks in these frequencies can bring down any structure, e.g. a bridge. An Investment Universe also has natural frequencies, characterized by its eigenvectors. A concentration of risks in the direction of any such eigenvector exposes a portfolio to...

Portfolio optimisation for a Fund of Hedge Funds (“FoHF”) has to address the asymmetric, non-Gaussian nature of the underlying returns distributions. Furthermore, the objective functions and constraints are not necessarily convex or even smooth. Therefore traditional portfolio optimisation...