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Inferring Multi-Period Optimal Portfolios via Detrending Moving Average Cluster Entropy

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  • P. Murialdo
  • L. Ponta
  • A. Carbone

Abstract

Despite half a century of research, there is still no general agreement about the optimal approach to build a robust multi-period portfolio. We address this question by proposing the detrended cluster entropy approach to estimate the portfolio weights of high-frequency market indices. The information measure produces reliable estimates of the portfolio weights gathered from the real-world market data at varying temporal horizons. The portfolio exhibits a high level of diversity, robustness and stability as it is not affected by the drawbacks of traditional mean-variance approaches.

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  • P. Murialdo & L. Ponta & A. Carbone, 2021. "Inferring Multi-Period Optimal Portfolios via Detrending Moving Average Cluster Entropy," Papers 2104.09988, arXiv.org, revised Jul 2021.
    • Handle: RePEc:arx:papers:2104.09988
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    References listed on IDEAS

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    1. Gabriel Frahm & Christof Wiechers, 2013. "A Diversification Measure for Portfolios of Risky Assets," Palgrave Macmillan Books, in: Jonathan A. Batten & Peter MacKay & Niklas Wagner (ed.), Advances in Financial Risk Management, chapter 13, pages 312-330, Palgrave Macmillan.
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