Dynamic asset allocation — Chasing a moving target
Keh‐Chin Chang, Zhi Tian, Jiayang Yu
Abstract
Keh‐Chin Chang, Zhi Tian, Jiayang Yu
Abstract
Dynamic construction of optimal portfolio is investigated. Multiple assets are allocated and rebalanced periodically based on different principles. We develop several dynamic allocation strategies to maximize long-term portfolio value based on Kelly's approach related to mutual information. We show that the resulting asset allocation strategy outperforms the traditional approaches and produces an excellent trade-off between risk and return. Out of sample simulation results are also provided to demonstrate the performance.
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Dynamic construction of optimal portfolio is investigated. Multiple assets are allocated and rebalanced periodically based on different principles. We develop several dynamic allocation strategies to maximize long-term portfolio value based on Kelly's approach related to mutual information. We show that the resulting asset allocation strategy outperforms the traditional approaches and produces an excellent trade-off between risk and return. Out of sample simulation results are also provided to demonstrate the performance.
Key concepts: Portfolio, Portfolio allocation, Asset allocation, Computer science, Asset (computer security), Optimal allocation, Project portfolio management, Sample (material)