Title :
Portfolio Risk in Multiple Frequencies
Author :
Torun, Mustafa U. ; Akansu, Ali N. ; Avellaneda, Marco
Author_Institution :
Dokuz Eylul Univ. (D.E.U.), Izmir, Turkey
Abstract :
Portfolio risk, introduced by Markowitz in 1952 and defined as the standard deviation of the portfolio return, is an important metric in the modern portfolio theory (MPT). A popular method for portfolio selection is to manage the risk and return of a portfolio according to the cross-correlations of returns for various financial assets. In a real-world scenario, estimated empirical financial correlation matrix contains significant level of intrinsic noise that needs to be filtered prior to risk calculations.
Keywords :
financial management; matrix algebra; risk management; MPT; financial assets; financial correlation matrix; intrinsic noise; modern portfolio theory; multiple frequencies; portfolio return; portfolio risk; portfolio selection; risk calculations; Correlation; Eigenvalues and eigenfunctions; Financial management; Histograms; Investments; Matrix decomposition; Portfolios;
Journal_Title :
Signal Processing Magazine, IEEE
DOI :
10.1109/MSP.2011.941552