Decision Sciences
3 years ago

New Study Shows Negative Correlation Boosts Portfolio Performance in Stochastic Markets

SSRN Electronic Journal
Dynamic Mean-Downside Risk Portfolio Selection Problem with Stochastic Interest Rate in Continuous-Time
Weiping Wu, Ke Zhou, Zhicheng Li, Zhenpeng Tang

Paper Summary

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The article explores how to choose the best investment portfolio in a financial market where interest rates are unpredictable. By using specific measures to assess risk, the researchers found that portfolios perform better when there is a strong negative correlation between assets. They used mathematical methods to figure out the best investment strategies for this type of market.