Dynamic Portfolio Optimization with Inverse Covariance Clustering
A 2022 paper by Wang and Aste on portfolio optimization in equities: the abstract mentions a Sharpe ratio and leaves out a benchmark, an out-of-sample test, transaction costs, multiple testing and the size of the universe.
“By applying the same portfolio optimization technique on a ICC temporal cluster, instead of the whole train period, we show that one can generate portfolios with substantially higher Sharpe Ratios, which are statistically more robust and resilient with great reductions in maximum loss in extreme situations.”
AssetEquitiesindices
StrategyPortfolio optimization
GeographyUSUK
ClaimSharpe ratio
Missing from abstract: benchmark, out-of-sample test, costs, multiple testing, universe
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