Many financial portfolios are optimized without taking the higher moments into account. We recommend tilting these portfolios in a direction that increases their estimated mean and third central moment and decreases their variance and fourth central moment. The advantages of tilting come at the...

The aim of the paper is to analyze the effectiveness of Piotroski F-Score method for a selection of non-US markets (BRIC, UK, Germany), to identify the efficiency of this measure to generate Alpha. This study showed, that companies with high F-Score in non-US markets generate 8.2% (long...

Sophisticated algorithmic techniques are complementing human judgement across the fund industry. Whatever the type of rebalancing that occurs in the course of a longer horizon, it probably violates the buy-and-hold assumption. In this article, we develop the methodology to predict, dissect and...

This paper provides a framework for obtaining the estimator of expected asset returns for portfolio selection. The framework relies on a linear model where the expected returns are the coefficients to be estimated. The model is fitted to a synthetic dataset by Bayesian regression. The estimator...

Investors typically measure an asset’s potential to diversify a portfolio by its correlations with the portfolio’s other assets, but correlation is useful only if it provides a good estimate of how an asset’s returns co-occur cumulatively with the other asset returns over the investor’s...

An investigation of the limiting behavior of a risk capital allocation rule based on the Conditional Tail Expectation (CTE) risk measure is carried out. More specifically, with the help of general notions of Extreme Value Theory (EVT), the aforementioned risk capital allocation is shown to be...

We examine in this paper the training and test set performance of several equity factor models with a dataset of 20 years of data, 1,200 stocks and 100 factors. First, we examine several models to forecast expected returns, which can be used as baselines for more complex models: linear...

Markowitz’s celebrated mean-variance portfolio optimization theory assumes that the means and covariances of the underlying asset returns are known. In practice, they are unknown and have to be estimated from historical data. Plugging the estimates into the efficient frontier that assumes...

Factorial moments are convenient tools in nuclear physics to characterize the multiplicity distributions when phase-space resolution (Delta) becomes small. For uncorrelated particle production within Delta, Gaussian statistics holds and factorial moments Fq are equal to unity for all orders q....