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On the optimal allocation of assets in investment portfolio with application of modern portfolio and nonlinear dynamic chaos theories in investment, commercial and central banks  [PDF]
Dimitri O. Ledenyov,Viktor O. Ledenyov
Quantitative Finance , 2013,
Abstract: The investment economy is a main characteristic of prosperous society. The investment portfolio management is a main financial problem, which has to be solved by the investment, commercial and central banks with the application of modern portfolio theory in the investment economy. We use the learning analytics together with the integrative creative imperative intelligent conceptual co-lateral adaptive thinking with the purpose to advance our scientific knowledge on the diversified investment portfolio management in the nonlinear dynamic financial system. We apply the econophysics principles and the econometrics methods with the aim to find the solution to the problem of the optimal allocation of assets in the investment portfolio, using the advanced risk management techniques with the efficient frontier modeling in agreement with the modern portfolio theory and using the stability management techniques with the dynamic regimes modeling on the bifurcation diagram in agreement with the dynamic chaos theory. We show that the bifurcation diagram, created with the use of the logistic function in Matlab, can provide some valuable information on the stability of combining risky investments in the investment portfolio, solving the problem of optimization of assets allocation in the investment portfolio. We propose the Ledenyov investment portfolio theorem, based on the Lyapunov stability criteria, with the aim to create the optimized investment portfolio with the uncorrelated diversified assets, which can deliver the increased expected returns to the institutional and private investors in the nonlinear dynamic financial system in the frames of investment economy.
A Study on the Model of Portfolio Investment Decision Based on Tracking Error

MA Yong-kai,TANG Xiao-wo,

系统工程理论与实践 , 2001,
Abstract: This paper assumes that manager's portfolio and benchmark possess respective investment set of securities,presents a general model of portfolio investment decision based on tracking error and its optimal solution,and studies the corresponding optimal portfolio's efficiency and relative efficiency,and analyses the optimal portfolio structurally.
Portfolio Construction for Value Appreciation  [PDF]
Michael Ha, George Z. Liu, Lihui Zheng
Journal of Applied Mathematics and Physics (JAMP) , 2016, DOI: 10.4236/jamp.2016.44076

Background: While working as risk consultants at Barra in 1990’s, the first two authors decided to start collaborating on a research project with its first paper titled “Application of Volatility in Portfolio Construction” [1]. The third author was then a risk manager of a financial institution which was a client of Barra’s. Bringing his expertise in portfolio risk management, he joined the research team. Aim: The core of this paper lies in the construction of an investment portfolio with a main objective of value appreciation while examining its tracking error [1]-[3], a risk measurement with reference to a benchmark [1] [4]. The authors believe, while tracking error measurement is a common tool for portfolio risk management, total risk measurement is more important. The management goal is to minimize drawbacks using the technique of risk budgeting. These topics will be discussed in future research papers.

Research on Portfolio Investment Model Under the E-Sh Risk Measure

ZHANG Xi-bin,RONG Xi-min,ZHANG Shi-ying,

系统工程理论与实践 , 2000,
Abstract: Markowitz introduces the variance of marketable security's revenue rate as the investment risk measure, and constructs portfolio investment model to perform the selection procedure of an optimal portfolio. This paper analyses the shortcomings of Markowitz model, provides the risk goal function for the optimal portfolio selection, and constructs portfolio investment decision model. The paper also presents the solution of optimization model and the determination method of the portfolio efficient frontier. In the end, the paper elaborates the effectiveness of the risk goal function and the optimization model in the application research with a practical example.
Importance of the market portfolio description in the assessment of a sample of Spanish investment funds through the Jensen’s Alpha  [cached]
Cuadernos de Gestión , 2003,
Abstract: The right assessment of the investment funds performance and of the manager’s ability to add value with their management is an important aspect to which has been paid special attention. Among the traditional performance measures, one of the most used is the Jensen’s alpha. However, one of the main problems of the evaluation methods using the beta as a risk measure and, hence of the Jensen’s alpha, is their sensibility to the market portfolio. In this work we aim to study the importance of the market portfolio description in the assessment of a sample of Spanish investment funds through the Jensen’s alpha. We analyze the market portfolio influence, on the one hand, in the alpha outcomes and, on the other, in the ranking of the funds that they provide.
Portfolio Performance on Agency Mechanism with Capability of Manager  [PDF]
Haijun Yang, Wei Xia, Jian Fu
Theoretical Economics Letters (TEL) , 2018, DOI: 10.4236/tel.2018.81002
Abstract: By given different capabilities of managers, a novel model of optimal contracting is proposed in agency problems, which adds a new variable denoted by the manager’s ability in delegated portfolio management. Then we compare our results with Dybvig and Farnsworth’s (2010) and find a new effect by appending this variable. The results show that in the first-best situation with log utility, the optimal contract is in accord with the result of Dybvig and Farnsworth’s (2010). In the second-best situation, the optimal contract is a proportional sharing rule plus a bonus. However, the bonus is associated with variables including private signals and the manager’s ability. In the third-best situation, the manager’s share is no longer a constant; and the manager’s fee is no longer a linear combination of the returns, which depends on the signal and the manager’s ability. So manager’s ability is an important variable for the market return. We can also find that these institutional features are more similar to practice than other existing agency models and consistent with the reality of the situation. The numerical results also verify the solutions.
Ethical Investment and Portfolio Theory: Using Factor Analysis to Select a Portfolio  [PDF]
John Simister, Richard Whittle
Journal of Mathematical Finance (JMF) , 2013, DOI: 10.4236/jmf.2013.31A014

Ethical investments are a now a considerable sector in the investment market, with the Financial Times running the headline “Green and ethical investment comes of age” (Shepherd, [1]). Claudia Quiroz (lead fund manager for Cheviot Climate Assets Fund) predicts a strong future for ethical investment, with sustainable investment becoming a growing theme (Hoskin [2]). Much previous research in the ethical investment field divides investments into two categories: acceptable or unacceptable. This paper builds on the work of Barracchini and Addessi [3], in viewing how ethical an investment is to be a different dimensioneach investment is seen as being on a continuum, from least ethical to most ethical. This paper takes the work of Barracchini and Addessi [3] from a theoretical construct to an approach which can be applied by practitioners. In order to make a workable method, this paper uses conventional portfolio analysis (which focus on risk and return), combined with principal components analysis in order to minimize the risk of a portfolio. It adopts a specific functional form for the saver’s utility function, to assess which assets appears most desirable using that person’s values.


Investment Portfolio Evaluation by the Fuzzy Approach
Lambovska Maya,Marchev Angel
Journal of Competitiveness , 2011,
Abstract: This paper presents a new fuzzy approach for the evaluation of investment portfolio, where the approach is viewed by the authors as a sub-phase of the management process of these portfolios. The approach defines the mutual and delayed effects among the significant variables of the investment portfolio. The evaluation of the effects is described as fuzzy trapezoidal numbers and they are aggregated by mathematical operations with incidence matrices and fuzzy functions “experton”.

Bing Cheng,Xianhua Wei,

系统科学与数学 , 2005,
Abstract: Investment portfolio insurances have been widely used in investment industry worldwide since the invention of option theory. Constant proportional portfolio insurance (CPPI) strategies are the first choices of the portfolio managers of large size safe type funds because of the simplicity of the models, the flexibility to include risk profiles of the investors and the easiness to implement. In this paper we generalize the simple CPPI strategies to more general classes and find the relationship between CPPI and options. We also discuss the effects on CPPI strategies of no borrow constraints. We test the application of CPPI strategies in Chinese stock markets.
Management of Portfolio Investment Held by Pension Funds
Gabriela Anghelache,Dan Armeanu
Theoretical and Applied Economics , 2008,
Abstract: As a result of the fact that pension funds are financial intermediaries, the value of their assets and liabilities is influenced by changing conditions in financial markets. The market image of a pension fund (and hence its perceived value) are closely tied to the “financial health” of the fund. Setting up and managing complex investment portfolios requires that pension administrators use scientific models of portfolio selection and optimization based on the risk-expected return relationship. Most investment portfolios are modified in time as result of changing stock prices and investment policy objectives. Having established investment policy guidelines, the administrators of pension funds have to determine the structure of their portfolios so that the latter meet legal requirements.
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