In this study, we use zero-one variables to control fixed transaction costs independent of trade size in the portfolio selection problem. The optimal solution to the maximum flow, risk constrained stochastic portfolio network is found using Digital Portfolio Theory (DPT). Digital signals...

In this study, we use zero-one variables to control fixed transaction costs independent of trade size in the portfolio selection problem. The optimal solution to the maximum flow, risk constrained stochastic portfolio network is found using Digital Portfolio Theory (DPT). Digital signals...

Time horizon dimensions are added to asset pricing theory. Single period, static, arbitrage pricing theory (APT) describes single period risk with long horizon contributions in the frequency domain. Mean-reversion risks correspond to horizon variances. Mean-reversion risk is measured using the...

The nature of risk and long-term returns is not fully understood. There is a need for a measure of long-term risk at multiple horizons. Digital signal processing and an additive noise model are used to test the white noise hypothesis for total and idiosyncratic risk of individual firms at...

I examine capabilities of Digital Portfolio Theory (DPT) and extend it to control portfolio size. DPT is a static, single period mean-variance-autocovariance portfolio optimization paradigm that allows returns to be mean-reverting. The optimal dynamic single period solutions depend on the...