Economics, Econometrics and Finance
8 years ago

New portfolio strategy beats S&P500 with lower risk, changing investing game.

The Journal of Computational Finance
Robust active portfolio management
Emre Erdogan, Donald Goldfarb, Garud Iyenga

Paper Summary

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The article presents a method for managing investment portfolios that aims to minimize errors in estimating parameters and transaction costs. The researchers developed models that can handle various constraints and optimize portfolios using second-order cone programs. Testing on real market data showed that these robust strategies outperformed the S&P500 index without increasing volatility.