Regret-Based Selection for Sparse Dynamic Portfolios
26 Pages Posted: 5 Jul 2017 Last revised: 25 Jul 2017
Date Written: July 10, 2017
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
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