We introduce the value-and-criterion filter structure, a new framework for designing filters based on mathematical morphology. The value-and-criterion filter structure is more flexible than the morphological structure, because it allows linear and nonlinear operations other than just the minimum and maximum to be performed on the data. One particular value-and-criterion filter, the Mean of Leas...

It is well known that the out-of-sample performance of Markowitz’s mean-variance portfolio criterion can be negatively affected by estimation errors in the mean and covariance. In this paper we address the problem by regularizing the mean-variance objective function with a weighted elastic net penalty. We show that the use of this penalty can be motivated by a robust reformulation of the mean-v...

Abstract Factor analysis proposes an alternative approach to standard portfolio theory: the latter is optimisation based, while former estimation based. Also, in theory, returns are only explained by volatility factor, factor a multiplicity of factors, which managers can choose from tilt their portfolios. In attempting reconcile these worlds, we propose penalised utility function, incorporating...