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Smart network based portfolios
In this article we deal with the problem of portfolio allocation by enhancing network theory tools. We propose the use of the correlation network dependence structure in constructing some well-known risk-based models in which the estimation of the correlation matrix is a building block in the portfo...
Autores principales: | , , |
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Formato: | Online Artículo Texto |
Lenguaje: | English |
Publicado: |
Springer US
2022
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Materias: | |
Acceso en línea: | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8995926/ https://www.ncbi.nlm.nih.gov/pubmed/35431386 http://dx.doi.org/10.1007/s10479-022-04675-7 |
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author | Clemente, Gian Paolo Grassi, Rosanna Hitaj, Asmerilda |
author_facet | Clemente, Gian Paolo Grassi, Rosanna Hitaj, Asmerilda |
author_sort | Clemente, Gian Paolo |
collection | PubMed |
description | In this article we deal with the problem of portfolio allocation by enhancing network theory tools. We propose the use of the correlation network dependence structure in constructing some well-known risk-based models in which the estimation of the correlation matrix is a building block in the portfolio optimization. We formulate and solve all these portfolio allocation problems using both the standard approach and the network-based approach. Moreover, in constructing the network-based portfolios we propose the use of three different estimators for the covariance matrix: the sample, the shrinkage toward constant correlation and the depth-based estimators . All the strategies under analysis are implemented on three high-dimensional portfolios having different characteristics. We find that the network-based portfolio consistently performs better and has lower risk compared to the corresponding standard portfolio in an out-of-sample perspective. SUPPLEMENTARY INFORMATION: The online version contains supplementary material available at 10.1007/s10479-022-04675-7. |
format | Online Article Text |
id | pubmed-8995926 |
institution | National Center for Biotechnology Information |
language | English |
publishDate | 2022 |
publisher | Springer US |
record_format | MEDLINE/PubMed |
spelling | pubmed-89959262022-04-11 Smart network based portfolios Clemente, Gian Paolo Grassi, Rosanna Hitaj, Asmerilda Ann Oper Res S.i. : Claio 2018 In this article we deal with the problem of portfolio allocation by enhancing network theory tools. We propose the use of the correlation network dependence structure in constructing some well-known risk-based models in which the estimation of the correlation matrix is a building block in the portfolio optimization. We formulate and solve all these portfolio allocation problems using both the standard approach and the network-based approach. Moreover, in constructing the network-based portfolios we propose the use of three different estimators for the covariance matrix: the sample, the shrinkage toward constant correlation and the depth-based estimators . All the strategies under analysis are implemented on three high-dimensional portfolios having different characteristics. We find that the network-based portfolio consistently performs better and has lower risk compared to the corresponding standard portfolio in an out-of-sample perspective. SUPPLEMENTARY INFORMATION: The online version contains supplementary material available at 10.1007/s10479-022-04675-7. Springer US 2022-04-11 2022 /pmc/articles/PMC8995926/ /pubmed/35431386 http://dx.doi.org/10.1007/s10479-022-04675-7 Text en © The Author(s) 2022 https://creativecommons.org/licenses/by/4.0/Open AccessThis article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article’s Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article’s Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/ (https://creativecommons.org/licenses/by/4.0/) . |
spellingShingle | S.i. : Claio 2018 Clemente, Gian Paolo Grassi, Rosanna Hitaj, Asmerilda Smart network based portfolios |
title | Smart network based portfolios |
title_full | Smart network based portfolios |
title_fullStr | Smart network based portfolios |
title_full_unstemmed | Smart network based portfolios |
title_short | Smart network based portfolios |
title_sort | smart network based portfolios |
topic | S.i. : Claio 2018 |
url | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8995926/ https://www.ncbi.nlm.nih.gov/pubmed/35431386 http://dx.doi.org/10.1007/s10479-022-04675-7 |
work_keys_str_mv | AT clementegianpaolo smartnetworkbasedportfolios AT grassirosanna smartnetworkbasedportfolios AT hitajasmerilda smartnetworkbasedportfolios |