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Regret-Based Selection for Sparse Dynamic Portfolios

26 Pages Posted: 5 Jul 2017 Last revised: 25 Jul 2017

David Puelz

University of Texas at Austin - Red McCombs School of Business

P. Richard Hahn

Arizona State University (ASU) - Department of Mathematics and Statistics

Carlos M. Carvalho

University of Texas at Austin - Red McCombs School of Business

Date Written: July 10, 2017

Abstract

This paper considers portfolio construction in a dynamic setting. We specify a loss function comprised of utility and complexity components with an unknown tradeoff parameter. We develop a novel regret-based criterion for selecting the tradeoff parameter to construct optimal sparse portfolios over time.

Keywords: Bayesian methods, dynamic portfolio selection, decision theory, model selection

Suggested Citation

Puelz, David and Hahn, P. Richard and Carvalho, Carlos M., Regret-Based Selection for Sparse Dynamic Portfolios (July 10, 2017). Available at SSRN: https://ssrn.com/abstract=2995484

David Puelz (Contact Author)

University of Texas at Austin - Red McCombs School of Business ( email )

Austin, TX 78712
United States

P. Richard Hahn

Arizona State University (ASU) - Department of Mathematics and Statistics ( email )

Tempe, AZ 85287-1804
United States

Carlos Carvalho

University of Texas at Austin - Red McCombs School of Business ( email )

Austin, TX 78712
United States

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