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- Title
Robustness in Portfolio Optimization.
- Authors
Kim, Jang Ho; Kim, Woo Chang; Lee, Yongjae; Choi, Bong-Geun; Fabozzi, Frank J.
- Abstract
Portfolio optimization is the basic quantitative approach for finding optimal portfolio weights. It has become increasingly important as portfolio construction involves more and more data and automated approaches. The inherent uncertainty in financial markets has led to consistent demand for improved robustness of portfolio models. In this article, the authors discuss the importance of robustness in portfolio optimization and present powerful methods that include robust estimators, robust portfolio optimization, distributionally robust optimization, and scenario-based optimization. They also review data-driven methods, machine learning-based models, and practical approaches for improving portfolio robustness.
- Publication
Journal of Portfolio Management, 2023, Vol 49, Issue 9, p140
- ISSN
0095-4918
- Publication type
Academic Journal
- DOI
10.3905/jpm.2023.1.522