IDEAS home Printed from https://ideas.repec.org/a/taf/quantf/v18y2018i6p1017-1031.html
   My bibliography  Save this article

Rao’s quadratic entropy and maximum diversification indexation

Author

Listed:
  • Benoît Carmichael
  • Gilles Boevi Koumou
  • Kevin Moran

Abstract

This paper proposes a new formulation of the maximum diversification indexation strategy based on Rao’s Quadratic Entropy. It clarifies the investment problem underlying this diversification strategy, identifies the source of its out-of-sample performance, and suggests new dimensions along which this performance can be improved. We show that these potential improvements are quantitatively important and are robust to portfolio turnover, portfolio risk, estimation window, and covariance matrix estimation.

Suggested Citation

  • Benoît Carmichael & Gilles Boevi Koumou & Kevin Moran, 2018. "Rao’s quadratic entropy and maximum diversification indexation," Quantitative Finance, Taylor & Francis Journals, vol. 18(6), pages 1017-1031, June.
    • Handle: RePEc:taf:quantf:v:18:y:2018:i:6:p:1017-1031
    DOI: 10.1080/14697688.2017.1383625
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/14697688.2017.1383625
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/14697688.2017.1383625?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sarah Perrin & Thierry Roncalli, 2019. "Machine Learning Optimization Algorithms & Portfolio Allocation," Papers 1909.10233, arXiv.org.
    2. Gilles Boevi Koumou & Georges Dionne, 2022. "Coherent Diversification Measures in Portfolio Theory: An Axiomatic Foundation," Risks, MDPI, vol. 10(11), pages 1-19, October.
    3. Francesco Cesarone & Rosella Giacometti & Manuel Luis Martino & Fabio Tardella, 2023. "A return-diversification approach to portfolio selection," Papers 2312.09707, arXiv.org.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:quantf:v:18:y:2018:i:6:p:1017-1031. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RQUF20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.