First passage times in portfolio optimization

Detalhes bibliográficos
Autor(a) principal: Zsurkis, Gabriel
Data de Publicação: 2024
Outros Autores: Nicolau, João, Rodrigues, Paulo M.M.
Tipo de documento: Artigo
Idioma: eng
Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
Texto Completo: http://hdl.handle.net/10362/162562
Resumo: Funding Information: The authors thank three anonymous referees and Editor Roman Slowinski for their helpful and constructive feedback on an earlier version of this paper. Financial support from the Portuguese Science Foundation (FCT) through project PTDC/EGE-ECO/28924/2017, and (UID/ECO/00124/2013 and Social Sciences DataLab, Project 22209), POR Lisboa (LISBOA-01-0145-FEDER-007722 and Social Sciences DataLab, Project 22209) and POR Norte (Social Sciences DataLab, Project 22209) is also gratefully acknowledged. Publisher Copyright: © 2023 The Authors
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spelling First passage times in portfolio optimizationA novel nonparametric approachFirst-passage probabilityIntra-horizon riskMarkov chainsPortfolio optimizationComputer Science(all)Modelling and SimulationManagement Science and Operations ResearchInformation Systems and ManagementFunding Information: The authors thank three anonymous referees and Editor Roman Slowinski for their helpful and constructive feedback on an earlier version of this paper. Financial support from the Portuguese Science Foundation (FCT) through project PTDC/EGE-ECO/28924/2017, and (UID/ECO/00124/2013 and Social Sciences DataLab, Project 22209), POR Lisboa (LISBOA-01-0145-FEDER-007722 and Social Sciences DataLab, Project 22209) and POR Norte (Social Sciences DataLab, Project 22209) is also gratefully acknowledged. Publisher Copyright: © 2023 The AuthorsThis paper introduces a portfolio optimization procedure that aims to minimize the intra-horizon (IH) risk subject to a minimum expected time to achieve a target cumulative return. To estimate the first passage probabilities and the expected time a novel nonparametric method and a new Markov chain order determination approach are developed. The optimization framework proposed allows us to include novel path-dependent measures of risk and return in the asset allocation problem. An empirical application to S&P 100 companies, a risk-free asset and stock indices is provided. Our empirical results suggest that the proposed framework exhibits more consistency between in-sample and out-of-sample performance than the mean-variance model and an alternative optimization problem that minimizes the MaxVaR measure of Boudoukh et al. (2004). Overall, the portfolio optimization approach we introduce results in higher out-of-sample annualized returns for relatively low levels of IH risk.NOVA School of Business and Economics (NOVA SBE)RUNZsurkis, GabrielNicolau, JoãoRodrigues, Paulo M.M.2024-01-19T22:50:20Z2024-02-012024-02-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10362/162562eng0377-2217PURE: 70038516https://doi.org/10.1016/j.ejor.2023.07.044info:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2024-03-11T05:45:31Zoai:run.unl.pt:10362/162562Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-20T03:58:58.655302Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse
dc.title.none.fl_str_mv First passage times in portfolio optimization
A novel nonparametric approach
title First passage times in portfolio optimization
spellingShingle First passage times in portfolio optimization
Zsurkis, Gabriel
First-passage probability
Intra-horizon risk
Markov chains
Portfolio optimization
Computer Science(all)
Modelling and Simulation
Management Science and Operations Research
Information Systems and Management
title_short First passage times in portfolio optimization
title_full First passage times in portfolio optimization
title_fullStr First passage times in portfolio optimization
title_full_unstemmed First passage times in portfolio optimization
title_sort First passage times in portfolio optimization
author Zsurkis, Gabriel
author_facet Zsurkis, Gabriel
Nicolau, João
Rodrigues, Paulo M.M.
author_role author
author2 Nicolau, João
Rodrigues, Paulo M.M.
author2_role author
author
dc.contributor.none.fl_str_mv NOVA School of Business and Economics (NOVA SBE)
RUN
dc.contributor.author.fl_str_mv Zsurkis, Gabriel
Nicolau, João
Rodrigues, Paulo M.M.
dc.subject.por.fl_str_mv First-passage probability
Intra-horizon risk
Markov chains
Portfolio optimization
Computer Science(all)
Modelling and Simulation
Management Science and Operations Research
Information Systems and Management
topic First-passage probability
Intra-horizon risk
Markov chains
Portfolio optimization
Computer Science(all)
Modelling and Simulation
Management Science and Operations Research
Information Systems and Management
description Funding Information: The authors thank three anonymous referees and Editor Roman Slowinski for their helpful and constructive feedback on an earlier version of this paper. Financial support from the Portuguese Science Foundation (FCT) through project PTDC/EGE-ECO/28924/2017, and (UID/ECO/00124/2013 and Social Sciences DataLab, Project 22209), POR Lisboa (LISBOA-01-0145-FEDER-007722 and Social Sciences DataLab, Project 22209) and POR Norte (Social Sciences DataLab, Project 22209) is also gratefully acknowledged. Publisher Copyright: © 2023 The Authors
publishDate 2024
dc.date.none.fl_str_mv 2024-01-19T22:50:20Z
2024-02-01
2024-02-01T00:00:00Z
dc.type.status.fl_str_mv info:eu-repo/semantics/publishedVersion
dc.type.driver.fl_str_mv info:eu-repo/semantics/article
format article
status_str publishedVersion
dc.identifier.uri.fl_str_mv http://hdl.handle.net/10362/162562
url http://hdl.handle.net/10362/162562
dc.language.iso.fl_str_mv eng
language eng
dc.relation.none.fl_str_mv 0377-2217
PURE: 70038516
https://doi.org/10.1016/j.ejor.2023.07.044
dc.rights.driver.fl_str_mv info:eu-repo/semantics/openAccess
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.source.none.fl_str_mv reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
instacron:RCAAP
instname_str Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
instacron_str RCAAP
institution RCAAP
reponame_str Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
collection Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
repository.name.fl_str_mv Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
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