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Portfolio optimization through a network approach: Network assortative mixing and portfolio diversification

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  • Ricca, Federica
  • Scozzari, Andrea

Abstract

The paper deals with the classical problem of selecting a portfolio in the financial market and follows a risk-return optimization approach. The main issue in portfolio selection is capturing the dependency structure of the returns of the different assets. In the well-known Markowitz models this is measured by the variance/covariance matrix of the assets’ returns. Recent works have focused on a new way of modeling the dependency between returns of different assets by means of the so called “market graph” or “correlation graph”.

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  • Ricca, Federica & Scozzari, Andrea, 2024. "Portfolio optimization through a network approach: Network assortative mixing and portfolio diversification," European Journal of Operational Research, Elsevier, vol. 312(2), pages 700-717.
    • Handle: RePEc:eee:ejores:v:312:y:2024:i:2:p:700-717
    DOI: 10.1016/j.ejor.2023.07.010
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    1. Fabio Vanni & Asmerilda Hitaj & Elisa Mastrogiacomo, 2024. "Enhancing Portfolio Allocation: A Random Matrix Theory Perspective," Mathematics, MDPI, vol. 12(9), pages 1-16, May.
    2. Dimitar Kitanovski & Igor Mishkovski & Viktor Stojkoski & Miroslav Mirchev, 2024. "Network-based diversification of stock and cryptocurrency portfolios," Papers 2408.11739, arXiv.org.

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