Analysing the Panel Study of Income Dynamics and Health Retirement Study, we investigate extent to which US households reduce their financial risk exposure when confronted with background risk. Our novel modelling approach – termed a deflated ordered fractional model quantifies how overall composition household portfolio three asset classes adjusts risk, is unique in recovering for any given ri...

This paper proposes a method which combines a clustering technique with asset allocation methods, to improve portfolio Sharpe ratios and weights stability. The portfolio weights are computed based on cluster members and cluster portfolios, which are decided by an optimal cluster pattern. The optimized cluster pattern tells the belonging of assets to particular clusters, which is identified by u...

In this paper we solve the problem of static portfolio allocation based on historical Value at Risk (VaR) by using genetic algorithm (GA). VaR is a predominantly used measure of risk of extreme quantiles in modern finance. For estimation of historical static portfolio VaR, calculation of time series of portfolio returns is required. To avoid daily recalculations of proportion of capital investe...

This paper deals with a neural network architecture which establishes a portfolio management system similar to the Black / Litterman approach. This allocation scheme distributes funds across various securities or financial markets while simultaneously complying with specific allocation constraints which meet the requirements of an investor. The portfolio optimization algorithm is modeled by a f...

This article builds on the mean-variance criterion and the links with the expected utility maximization to define the optimal allocation of portfolios, and extends the results in two ways, first considers tailored made utility functions, which can be non continuous and able to capture possible preferences associated with some portfolio managers. Second, it presents results that relate to static...

This paper surveys asset allocation methods that extend the traditional approach. An important feature of the the traditional approach is that measures the risk and return tradeoff in terms of mean and variance of final wealth. However, there are also other important features that are not always made explicit in terms of investor’s wealth, information, and horizon: The investor makes a single p...