IDEAS home Printed from https://ideas.repec.org/a/spr/joinma/v28y2017i3d10.1007_s10845-014-1011-7.html
   My bibliography  Save this article

A portfolio optimization model for minimizing soft margin-based generalization bound

Author

Listed:
  • Minghu Ha

    (Hebei University
    Hebei University of Engineering)

  • Yang Yang

    (Hebei University)

  • Chao Wang

    (Hebei University of Engineering)

Abstract

Roy’s safety first (RSF) criterion aims to minimize the shortfall probability in portfolio selection. Smoothed safety first portfolio optimization model is a useful tool to realize RSF criterion by minimizing an approximation of the empirical shortfall probability. However, the generalization performance of the smoothed safety first portfolio optimization model may be poor when the number of the samples is finite. In this paper, a soft margin-based generalization bound on the shortfall probability is obtained firstly. Then, a portfolio optimization model is built by minimizing the soft margin-based generalization bound. Finally, the good generalization performance of the portfolio optimization model is verified by experiments.

Suggested Citation

  • Minghu Ha & Yang Yang & Chao Wang, 2017. "A portfolio optimization model for minimizing soft margin-based generalization bound," Journal of Intelligent Manufacturing, Springer, vol. 28(3), pages 759-766, March.
    • Handle: RePEc:spr:joinma:v:28:y:2017:i:3:d:10.1007_s10845-014-1011-7
    DOI: 10.1007/s10845-014-1011-7
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10845-014-1011-7
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10845-014-1011-7?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. M. Ryan Haley & Charles Whiteman, 2008. "Generalized Safety First and a New Twist on Portfolio Performance," Econometric Reviews, Taylor & Francis Journals, vol. 27(4-6), pages 457-483.
    2. M. Haley, 2014. "Gaussian and logistic adaptations of smoothed safety first," Annals of Finance, Springer, vol. 10(2), pages 333-345, May.
    3. Michael Stutzer, 2011. "Portfolio choice with endogenous utility: a large deviations approach," World Scientific Book Chapters, in: Leonard C MacLean & Edward O Thorp & William T Ziemba (ed.), THE KELLY CAPITAL GROWTH INVESTMENT CRITERION THEORY and PRACTICE, chapter 43, pages 619-640, World Scientific Publishing Co. Pte. Ltd..
    4. M. Ryan Haley & Harry J. Paarsch & Charles H. Whiteman, 2013. "Smoothed safety first and the holding of assets," Quantitative Finance, Taylor & Francis Journals, vol. 13(2), pages 167-176, January.
    5. Victor DeMiguel & Lorenzo Garlappi & Francisco J. Nogales & Raman Uppal, 2009. "A Generalized Approach to Portfolio Optimization: Improving Performance by Constraining Portfolio Norms," Management Science, INFORMS, vol. 55(5), pages 798-812, May.
    6. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, March.
    7. Levy, Haim & Sarnat, Marshall, 1972. "Safety First — An Expected Utility Principle," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 7(3), pages 1829-1834, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. M. Ryan Haley, 2017. "K-fold cross validation performance comparisons of six naive portfolio selection rules: how naive can you be and still have successful out-of-sample portfolio performance?," Annals of Finance, Springer, vol. 13(3), pages 341-353, August.
    2. M. Ryan Haley, 2016. "Shortfall minimization and the Naive (1/N) portfolio: an out-of-sample comparison," Applied Economics Letters, Taylor & Francis Journals, vol. 23(13), pages 926-929, September.
    3. Haley, M. Ryan, 2008. "A simple nonparametric approach to low-dimension, shortfall-based portfolio selection," Finance Research Letters, Elsevier, vol. 5(3), pages 183-190, September.
    4. Haley, M. Ryan & McGee, M. Kevin, 2011. ""KLICing" there and back again: Portfolio selection using the empirical likelihood divergence and Hellinger distance," Journal of Empirical Finance, Elsevier, vol. 18(2), pages 341-352, March.
    5. Levy, Haim & Levy, Moshe, 2009. "The safety first expected utility model: Experimental evidence and economic implications," Journal of Banking & Finance, Elsevier, vol. 33(8), pages 1494-1506, August.
    6. Georges Hübner & Thomas Lejeune, 2015. "Portfolio choice and investor preferences : A semi-parametric approach based on risk horizon," Working Paper Research 289, National Bank of Belgium.
    7. M. Ryan Haley, 2018. "A nonparametric quantity-of-quality approach to assessing financial asset return performance," Annals of Finance, Springer, vol. 14(3), pages 343-351, August.
    8. M. Haley, 2014. "Gaussian and logistic adaptations of smoothed safety first," Annals of Finance, Springer, vol. 10(2), pages 333-345, May.
    9. Giovanni Bonaccolto & Massimiliano Caporin & Sandra Paterlini, 2018. "Asset allocation strategies based on penalized quantile regression," Computational Management Science, Springer, vol. 15(1), pages 1-32, January.
    10. Jacobs, Heiko & Müller, Sebastian & Weber, Martin, 2014. "How should individual investors diversify? An empirical evaluation of alternative asset allocation policies," Journal of Financial Markets, Elsevier, vol. 19(C), pages 62-85.
    11. Ammann, Manuel & Coqueret, Guillaume & Schade, Jan-Philip, 2016. "Characteristics-based portfolio choice with leverage constraints," Journal of Banking & Finance, Elsevier, vol. 70(C), pages 23-37.
    12. Wang, Christina Dan & Chen, Zhao & Lian, Yimin & Chen, Min, 2022. "Asset selection based on high frequency Sharpe ratio," Journal of Econometrics, Elsevier, vol. 227(1), pages 168-188.
    13. Füss, Roland & Miebs, Felix & Trübenbach, Fabian, 2014. "A jackknife-type estimator for portfolio revision," Journal of Banking & Finance, Elsevier, vol. 43(C), pages 14-28.
    14. Lassance, Nathan & Vrins, Frédéric, 2021. "Portfolio selection with parsimonious higher comoments estimation," Journal of Banking & Finance, Elsevier, vol. 126(C).
    15. Qi, Yue & Liao, Kezhi & Liu, Tongyang & Zhang, Yu, 2022. "Originating multiple-objective portfolio selection by counter-COVID measures and analytically instigating robust optimization by mean-parameterized nondominated paths," Operations Research Perspectives, Elsevier, vol. 9(C).
    16. Hiraki, Kazuhiro & Sun, Chuanping, 2022. "A toolkit for exploiting contemporaneous stock correlations," Journal of Empirical Finance, Elsevier, vol. 65(C), pages 99-124.
    17. Khaki, Audil & Prasad, Mason & Al-Mohamad, Somar & Bakry, Walid & Vo, Xuan Vinh, 2023. "Re-evaluating portfolio diversification and design using cryptocurrencies: Are decentralized cryptocurrencies enough?," Research in International Business and Finance, Elsevier, vol. 64(C).
    18. Paolella, Marc S. & Polak, Paweł & Walker, Patrick S., 2021. "A non-elliptical orthogonal GARCH model for portfolio selection under transaction costs," Journal of Banking & Finance, Elsevier, vol. 125(C).
    19. Li, Zhongfei & Yao, Jing & Li, Duan, 2010. "Behavior patterns of investment strategies under Roy's safety-first principle," The Quarterly Review of Economics and Finance, Elsevier, vol. 50(2), pages 167-179, May.
    20. Gourieroux, C. & Laurent, J. P. & Scaillet, O., 2000. "Sensitivity analysis of Values at Risk," Journal of Empirical Finance, Elsevier, vol. 7(3-4), pages 225-245, November.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:joinma:v:28:y:2017:i:3:d:10.1007_s10845-014-1011-7. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.