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Defensive online portfolio selection

Author

Listed:
  • Stella, Fabio
  • Ventura, Alfonso

Abstract

The class of defensive online portfolio selection algorithms,designed for fi nite investment horizon, is introduced. The Game Constantly Rebalanced Portfolio and the Worst Case Game Constantly Rebalanced Portfolio, are presented and theoretically analyzed. The analysis exploits the rich set of mathematical tools available by means of the connection between Universal Portfolios and the Game- Theoretic framework. The empirical performance of the Worst Case Game Constantly Rebalanced Portfolio algorithm is analyzed through numerical experiments concerning the FTSE 100, Nikkei 225, Nasdaq 100 and S&P500 stock markets for the time interval, from January 2007 to December 2009, which includes the credit crunch crisis from September 2008 to March 2009. The results emphasize the relevance of the proposed online investment algorithm which signi fi cantly outperformed the market index and the minimum variance Sharpe-Markowitz’s portfolio.

Suggested Citation

  • Stella, Fabio & Ventura, Alfonso, 2010. "Defensive online portfolio selection," MPRA Paper 33279, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:33279
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    References listed on IDEAS

    as
    1. repec:wsi:ijtafx:v:05:y:2002:i:06:n:s0219024902001547 is not listed on IDEAS
    2. Gaivoronski, Alexei A. & Stella, Fabio, 2003. "On-line portfolio selection using stochastic programming," Journal of Economic Dynamics and Control, Elsevier, vol. 27(6), pages 1013-1043, April.
    3. Igor V. Evstigneev & Klaus Reiner Schenk-Hoppé, 2002. "From Rags To Riches: On Constant Proportions Investment Strategies," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 5(06), pages 563-573.
    4. Gaivoronski, A & Stella, F, 2000. "Nonstationary Optimization Approach for Finding Universal Portfolios," MPRA Paper 21913, University Library of Munich, Germany.
    5. Thomas M. Cover, 1991. "Universal Portfolios," Mathematical Finance, Wiley Blackwell, vol. 1(1), pages 1-29.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    on-line portfolio selection; universal portfolio; defensive strategy;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • C0 - Mathematical and Quantitative Methods - - General
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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