Robust portfolio optimization

Huitong Qiu, Fang Han, Han Liu, Brian S Caffo

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

We propose a robust portfolio optimization approach based on quantile statistics. The proposed method is robust to extreme events in asset returns, and accommodates large portfolios under limited historical data. Specifically, we show that the risk of the estimated portfolio converges to the oracle optimal risk with parametric rate under weakly dependent asset returns. The theory does not rely on higher order moment assumptions, thus allowing for heavy-tailed asset returns. Moreover, the rate of convergence quantifies that the size of the portfolio under management is allowed to scale exponentially with the sample size of the historical data. The empirical effectiveness of the proposed method is demonstrated under both synthetic and real stock data. Our work extends existing ones by achieving robustness in high dimensions, and by allowing serial dependence.

Original languageEnglish (US)
Title of host publicationAdvances in Neural Information Processing Systems
PublisherNeural information processing systems foundation
Pages46-54
Number of pages9
Volume2015-January
StatePublished - 2015
Event29th Annual Conference on Neural Information Processing Systems, NIPS 2015 - Montreal, Canada
Duration: Dec 7 2015Dec 12 2015

Other

Other29th Annual Conference on Neural Information Processing Systems, NIPS 2015
CountryCanada
CityMontreal
Period12/7/1512/12/15

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ASJC Scopus subject areas

  • Computer Networks and Communications
  • Information Systems
  • Signal Processing

Cite this

Qiu, H., Han, F., Liu, H., & Caffo, B. S. (2015). Robust portfolio optimization. In Advances in Neural Information Processing Systems (Vol. 2015-January, pp. 46-54). Neural information processing systems foundation.

Robust portfolio optimization. / Qiu, Huitong; Han, Fang; Liu, Han; Caffo, Brian S.

Advances in Neural Information Processing Systems. Vol. 2015-January Neural information processing systems foundation, 2015. p. 46-54.

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Qiu, H, Han, F, Liu, H & Caffo, BS 2015, Robust portfolio optimization. in Advances in Neural Information Processing Systems. vol. 2015-January, Neural information processing systems foundation, pp. 46-54, 29th Annual Conference on Neural Information Processing Systems, NIPS 2015, Montreal, Canada, 12/7/15.
Qiu H, Han F, Liu H, Caffo BS. Robust portfolio optimization. In Advances in Neural Information Processing Systems. Vol. 2015-January. Neural information processing systems foundation. 2015. p. 46-54
Qiu, Huitong ; Han, Fang ; Liu, Han ; Caffo, Brian S. / Robust portfolio optimization. Advances in Neural Information Processing Systems. Vol. 2015-January Neural information processing systems foundation, 2015. pp. 46-54
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