Mathematical Finance & Financial Data Science Seminar
A Robust Approach to Optimal Portfolio Choice with Parameter Uncertainty
Speaker: Majeed Simaan, Steven Institute of Technology - School of Business
Location: Online Zoom access provided to registrants
Date: Tuesday, March 15, 2022, 5:30 p.m.
Many studies show that mean-variance portfolios perform poorly, delivering suboptimal average out-of-sample utility. A lesser-known fact we characterize is that their out-of-sample utility is also very volatile. Using our analytical characterization of performance volatility, we propose a robustness measure that balances out-of-sample utility mean and volatility and show that neither mean-variance portfolios nor minimum-variance portfolios offer maximal robust performance. Our robustness measure serves as a portfolio framework to construct strategies that achieve the optimal tradeoff between out-of-sample utility mean and volatility. These strategies are resilient to estimation errors and outperform portfolios that ignore parameter uncertainty or out-of-sample utility risk.
Majeed Simaan is a tenure-track assistant professor of Finance and Financial Engineering at the School of Business at Stevens Institute of Technology (SIT). He holds a Ph.D. in Finance from Rensselaer Polytechnic Institute (RPI) 2018. His research interests revolve around Risk Management, focusing on Asset allocation and Pricing. His research has been presented globally and published in different peer-reviewed journals, such as the European Journal of Operational Research, Quantitative Finance, Journal of Futures Markets, and International Review of Financial Analysis. In addition, he enjoys teaching and promoting open-source statistical computing. He holds both BA and MA in Statistics from the University of Haifa, specializing in actuarial science.
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