Robust Selling Times in Adaptive Portfolio Management

Authors

  • Michael Dziecichowicz
  • Aurelie Thiele

Keywords:

trigger thresholds, confidence intervals, adaptive portfolio management

Abstract

Traditional techniques in portfolio management rely on the precise knowledge of the underlying probability distributions; in practice, however, such information is difficult to obtain because multiple factors affect stock prices on a daily basis and unexpected events might affect the price dynamics. To address this issue, we propose an approach to dynamic portfolio management based on the sequential update of stock price forecasts in a robust optimization setting, where the updating process is driven by the historical observations. Forecasts are updated using only the most recent data when the stock price differs significantly from predictions. In this work, we present a robust framework to optimal selling time theory. We introduce a wait-to-decide period, and allow actual price movements to drive the best decision in response to a bad investment. Numerical results illustrate our strategy, which requires less frequent updating of the problem parameters than in the traditional approach while exhibiting promising performance.

Author Biographies

Michael Dziecichowicz

Dept of Industrial and Systems Engineering Lehigh University Work supported in part by a NSF IGERT fellowship.

Aurelie Thiele

P.C. Rossin Assistant Professor Dept of Industrial and Systems Engineering Lehigh University Work supported in part by NSF Grant DMI-0540143

Downloads

Published

2009-02-03

How to Cite

Dziecichowicz, M., & Thiele, A. (2009). Robust Selling Times in Adaptive Portfolio Management. Algorithmic Operations Research, 4(1), Pages 58 – 69. Retrieved from https://journals.lib.unb.ca/index.php/AOR/article/view/5652

Issue

Vol. 4 No. 1 (2009)

Section

Articles

License

The copyright of the submitted article is hereby transferred to “Preeminent Academic Facets Inc. (the “publisher”) to the extent possible by the laws in the respective countries of the author(s). The author(s) retain all other rights including the following: 1. Any patents and trademark rights. 2. Right to post a pre-print version of the paper on the author’s personal website which is not used for commercial purposes. The author(s) warrant that the work is original, it has not been published elsewhere, it is not currently under consideration for publication in any form, and it does not infringe any copyright laws. The signing author or agent further warrants that all authors, if applicable, have been informed of the terms of this agreement and obtained the approval and authority to sign the agreement.