Conventional wisdom holds that multiperiod portfolio optimization problems are best, if not only, solved by dynamic programming. But dynamic programming suffers from the curse of dimensionality whereby optimization becomes intractable as time horizon and number of assets increase, thereby...

We revisit mean-risk portfolio selection in a one-period financial market where risk is quantified by a positively homogeneous risk measure ρ on L1. We first show that under mild assumptions, the set of optimal portfolios for a fixed return is nonempty and compact. However, unlike in classical...

A framework is developed for portfolio optimization with higher-order Stochastic Dominance constraints. A finite system of restrictions on the lower partial moments can be used for evaluating the efficiency of a given benchmark and for constructing enhanced portfolios which dominate the...

This paper studies optimal equity portfolios with long-term horizon under heterogeneous risk aversion levels. We focus on European stocks and empirically show that contemporaneous excess returns of semi-active strategies are negatively associated with market conditions and sentiment. Consistent...

This paper develops a tractable dynamic model of competition between two risk-averse portfolio managers who attempt to outperform each other by trading in different stocks, reflecting asset specialization. We characterize explicitly the unique Nash equilibrium portfolio policies, and show that a...

We introduce a generic solver for dynamic portfolio allocation problems when the market exhibits return predictability, price impact and partial observability. We assume that the price modeling can be encoded into a linear state-space and we demonstrate how the problem then falls into the LQG...

We develop an optimization method for constructing investment portfolios that dominate a given benchmark index in terms of third-degree stochastic dominance. Our approach relies on the properties of the semivariance function, a refinement of an existing ‘super-convex' dominance condition and...

Spanish Abstract: La relación existente entre el riego y la rentabilidad de un activo financiero es una preocupación constante del inversionista a la hora de conformar su portafolio de inversión. La principal meta en la construcción del portafolio consiste en distribuir óptimamente la...

This study develops and implements methods for analyzing whether introducing new securities or relaxing investment constraints improves the investment opportunity set for risk averse investors. We develop a statistical test procedure for ‘stochastic spanning' for two nested polyhedral...