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Questions tagged [portfolio-theory]

The tag has no usage guidance.

6
votes
3answers
312 views

Maximum Sharpe portfolio (no short selling restrictions)

Suppose we have $n$ assets whose expected return vector is $r$ and is positive, and whose covariance matrix is $\Sigma$. Is there a closed form or quasi closed form (like the eigenvector of a matrix ...
15
votes
2answers
1k views

Real world application of stochastic portfolio theory

There is a branche of stochastic portfolio theory (see also this question). Fernholz and Karatzas have published research in this field (e.g. "Diversity and relative arbitrage in equity markets") and ...
2
votes
2answers
301 views

Why is a risk-free portfolio desirable?

I am in the process of creating a program that generates status-quo variance-free portfolio (at least theoretically), and my question is pretty fundamental, which may just mean dumb. I am sorry if ...
7
votes
2answers
456 views

Intuitive explanation of stochastic portfolio theory

Fernholz and Karatzas have published various papers about so called stochastic portfolio theory. Basically they say that the return to be expected from a portfolio on the long run is rather the ...