The expanding number of assets offers more opportunities for investors but poses new challenges for modern portfolio management (PM). As a central plank of PM, portfolio selection by expected utility maximization (EUM) faces uncontrollable estimation and optimization errors in ultrahigh-dimensional scenarios. Past strategies for high-dimensional PM mainly concern only large-cap companies and select many stocks, making PM impractical. We propose a sample-average approximation-based portfolio strategy to tackle the difficulties above with cardinality constraints. Our strategy bypasses the estimation of mean and covariance, the Chinese walls in high-dimensional scenarios. Empirical results on S&P 500 and Russell 2000 show that an appropriate number of carefully chosen assets leads to better out-of-sample mean-variance efficiency. On Russell 2000, our best portfolio profits as much as the equally-weighted portfolio but reduces the maximum drawdown and the average number of assets by 10% and 90%, respectively. The flexibility and the stability of incorporating factor signals for augmenting out-of-sample performances are also demonstrated. Our strategy balances the trade-off among the return, the risk, and the number of assets with cardinality constraints. Therefore, we provide a theoretically sound and computationally efficient strategy to make PM practical in the growing global financial market.
翻译:越来越多的资产为投资者提供了更多的机会,但对现代证券组合管理提出了新的挑战。作为总理的中央规划,预期公用事业最大化(EUM)的投资组合选择面临无法控制的估算和优化错误,在超高层面的情景下,过去高层次的投资组合战略主要只涉及大公司,选择了许多股票,使PM不切实际。我们提出了一个基于抽样的平均近似投资组合战略,以解决上述最基本制约因素带来的困难。我们的战略绕过了对中值和共差的估计,中国高层次的墙。S & P 500和Russell 2000年S & P 500和Russell的经验显示,经过仔细选择的适当数量的资产导致更好的超模版平均逆差效率。在Russell 2000年,我们最好的投资组合利润与同等规模的投资组合一样,但将最高缩编和资产平均数量分别减少10%和90%。我们提出的纳入要素信号以扩大溢价业绩的灵活性和稳定性也得到了证明。我们的战略平衡了回报、风险和资产数量之间的平衡,在不断增长的货币政策中,我们从理论上提供了一种稳定的市场现实的计算。