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Risk-Adjusted On-line Portfolio Selection

In: Operations Research Proceedings 2013

Author

Listed:
  • Robert Dochow

    (Saarland University)

  • Esther Mohr

    (University of Mannheim)

  • Günter Schmidt

    (University of Cape Town)

Abstract

The objective of on-line portfolio selection is to design provably good algorithms with respect to some on-line or offline benchmark. Existing algorithms do not consider ‘trading risk’. We present a novel risk-adjusted portfolio selection algorithm (RAPS). RAPS incorporates the ‘trading risk’ in terms of the maximum possible loss. We show that RAPS performs provably ‘as well as’ the Universal Portfolio (UP) [4] in the worst-case. We empirically evaluate RAPS on historical NYSE data. Results show that RAPS is able to beat BCRP as well as several ‘follow-the-winner’ algorithms from the literature, including UP. We conclude that RAPS outperforms in case the assets in the portfolio follow a positive trend.

Suggested Citation

  • Robert Dochow & Esther Mohr & Günter Schmidt, 2014. "Risk-Adjusted On-line Portfolio Selection," Operations Research Proceedings, in: Dennis Huisman & Ilse Louwerse & Albert P.M. Wagelmans (ed.), Operations Research Proceedings 2013, edition 127, pages 113-119, Springer.
    • Handle: RePEc:spr:oprchp:978-3-319-07001-8_16
    DOI: 10.1007/978-3-319-07001-8_16
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    Cited by:

    1. Esther Mohr & Robert Dochow, 2017. "Risk management strategies for finding universal portfolios," Annals of Operations Research, Springer, vol. 256(1), pages 129-147, September.

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