# Questions tagged [portfolio]

A portfolio is a collection of financial instruments. We often collect instruments together to represent the complete holdings of an investor and to analyze the overall risk (which may be lower due to diversification, i.e the portfolio holding multiple instruments).

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### Constraints in a Mean-Variance Optimization Case

Might be a repeat question, feel free to close if it is. I am trying to perform a mean-variance optimization (maximizing the Sharpe ratio) for lets say 5 assets. Besides the weights of the assets ...
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### Reinvesting the dividends of a dividend paying stock

Suppose we have a dividend paying stock that has the following dynamics: $$dS_t=S_t((\mu-q)dt+\sigma dW_t)$$ With a continuous dividend yield $q$. What is the portfolio $Y_t$ that results out of ...
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### When you have negative weights in the context of portfolio construction, what is the correct way normalize them?

For context, I am building an eigenportfolio following the conventions of Avellaneda and Lee Statistical Arbitrage in the U.S. Equities Market (2008), and I get negative weights for eigenportfolios 2,...
1 vote
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### CML equation - from where does the square come from?

In his textbook Asset management Andrew Ang uses the following CML formula (chapter 6) E(rm) - rf = y * σ^2 Where y is risk aversion factor What is the source of square? When I look at CML graph there ...
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### Interpretation of optimal weights in portfolio for risk-adjusted return maximization

To start, I'm not an expert in portfolio management. My research involves examining the effects that one financial asset has on another, specifically looking at the spillovers between cryptocurrency ...
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### Creating a Bloomberg bquant portfolio

As an ex-investment banker (salesperson to be specific) and amateur programmer, I’d like to move into quant work. I’d like to create a coding portfolio using Bloomberg’s bquant, but as I’ve left the ...
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### How do I find daily expected portfolio return that has both short and long assets?

For example, let's say we have 3 assets (A, B, C) with weights (0.3, 0.3, -0.4). Hence the portfolio is 20% net long. Assets have daily price returns of [[0.01, -0.02], [0.03, 0.04], [-0.01, 0.03]]. i....
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### How can this problem be defined formally?

Let's consider a straightforward example in which I possess a portfolio consisting of two stocks: $R(t) = S_{1}(t) \cdot x_1 + S_{2}(t) \cdot x_2,$ Here, $t$ represents the time index, $R(t)$ ...
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### How can one quantify the incremental value of better covariance matrix modeling in portfolio optimization?

Let's say we have two estimators of the covariance matrix, $\hat{C}_1$ and $\hat{C}_2$, and the latter is an improvement on the former. Is there any measure of the improvement that can be sensibly ...
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### Why do we need the covariance when calculating portfolio VaR?

I was recently learning about value at risk and how to calculate it, and one of the steps was to calculate the covariance of the returns of the securities making up the portofolio. This makes sense ...
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### Solving Equation for estimation risk averse parameter

Let the portfolio value follow the SDE: $$V_t=(\mu w+r(1-w))\cdot V_t\cdot dt +\sigma \cdot w\cdot V_t \cdot dB_t$$ where $\mu$ = drift of the portfolio, $\sigma$=standard deviation of the portfolio, ...
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### Incorporating market cap after Hierarchical Risk Parity (HRP) Portfolio Optimization. Using Black Litterman?

Hello financial experts :) I recently got interested in portfolio optimization. I'm still learning. As I'm familiar with python I started experimenting a little in JupyterNotebooks with riskfolio. I ...
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### Pricing of factors - portfolio sorts

if I read that someone is using portfolio sorts to determine whether a factor is priced in the cross section ( risk premium ) is it the two-pass Fama-MacBeth regression? Is there a material that would ...
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### compounding component contributions

Say I have a portfolio which contains two components, A & B. Below are the daily contributions to performance (0.02 equals 2%), where the overall portfolio return is equal to the sum of component ...
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### How to simply calculate future value of periodic contributions to an index fund account?

So, for the sake of simplicity, ignoring taxes, expense ratio, volatility or anything else other than known values for the following five variables: Starting contribution (dollars) Annual ...
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### Can I invest in the market portfolio of modern portfolio theory? [closed]

According to the theory, the market portfolio is composed of all assets weighted by their market capitalization, and this is the portfolio one should own. Is there a way to build a portfolio close to ...
1 vote
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### Literature about optimal number of stocks in a diversified portfolio

Is there any recent paper on how many assets one should consider for portfolio optimization techniques? I found: – https://www.jstor.org/stable/2330969?seq=1#metadata_info_tab_contents – https://...
1 vote