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arXiv · 1512.02310

Sparse Mean-Variance Portfolios: A Penalized Utility Approach

David Puelz·P. Richard Hahn·Carlos M. Carvalho
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Abstract

This paper considers mean-variance optimization under uncertainty, specifically when one desires a sparsified set of optimal portfolio weights. From the standpoint of a Bayesian investor, our approach produces a small portfolio from many potential assets while acknowledging uncertainty in asset returns and parameter estimates. We demonstrate the procedure using static and dynamic models for asset returns.

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David Puelz, P. Richard Hahn, Carlos M. Carvalho. 2016-10-04. Sparse Mean-Variance Portfolios: A Penalized Utility Approach. https://arxiv.org/abs/1512.02310

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