Classical decomposition of Markowitz portfolio selection / by Christopher Demone, Olivia Di Matteo and Barbara Collignon. : FB3-5/2020-21E-PDF
"In this study, we enhance Markowitz portfolio selection with graph theory for the analysis of two portfolios composed of either EU or US assets. Using a threshold-based decomposition of their respective covariance matrices, we perturb the level of risk in each portfolio and build the corresponding sets of graphs. We show that the "superimposition" of all graphs in a set allows for the (re)construction of the efficient frontiers. We also identify a relationship between the Sharpe ratio (SR) of a given portfolio and the topology of the corresponding network of assets. More specifically, we suggest SR = f(topology) ≈ f(ECC/BC), where ECC is the eccentricity and BC is the betweenness centrality averaged over all nodes in the network. At each threshold, the structural analysis of the correlated networks provides unique insights into the relationships between assets, agencies, risks, returns and cash flows. We observe that the best threshold or best graph representation corresponds to the portfolio with the highest Sharpe ratio. We also show that simulated annealing performs better than a gradient-based solver"--Abstract, page [1].
Lien permanent pour cette publication :
publications.gc.ca/pub?id=9.888252&sl=1
| Ministère/Organisme | Bank of Canada, issuing body. |
|---|---|
| Titre | Classical decomposition of Markowitz portfolio selection / by Christopher Demone, Olivia Di Matteo and Barbara Collignon. |
| Titre de la série | Staff working paper = Document de travail du personnel, 1701-9397 ; 2020-21 |
| Type de publication | Série - Voir l'enregistrement principal |
| Langue | [Anglais] |
| Format | Électronique |
| Document électronique | |
| Note(s) | Cover title. "Last updated: June 4, 2020." Includes bibliographical references. Includes abstract in French. |
| Information sur la publication | Ottawa, Ontario, Canada : Bank of Canada = Banque du Canada, 2020. ©2020 |
| Auteur / Contributeur | Demone, Christopher, author. |
| Description | 1 online resource (31 pages) : graphs (mostly colour). |
| Numéro de catalogue |
|
| Descripteurs | Investment analysis -- Canada. Gestion de portefeuille -- Canada. Analyse financière -- Canada. Portfolio management -- Canada. |
Demander des formats alternatifs
Pour demander une publication dans un format alternatif, remplissez le formulaire électronique des publications du gouvernement du Canada. Utilisez le champ du formulaire «question ou commentaire» pour spécifier la publication demandée.- Date de modification :