A fractal approach to long-only portfolio optimization is proposed. The quantitative system is based on naive risk parity approach. The core of the optimization scheme is a fractal distribution of returns, applied to estimation of the volatility law. Out-of-sample performance data has been represented in ten period of observation with half year and one year horizons. Implementation of fractal estimator of volatility improves all performance metrics of portfolio in comparison to the standard estimator of volatility. The efficiency of fractal estimator plays a significant protective role for the periods of market abnormal volatility and drawdowns, which allows beating the market in the long term perspective. The provided results may be useful for a wide range of quantitative investors, including hedge funds, rob-advisors and retail investors.
Comments: 5 Pages.
[v1] 2017-03-20 14:27:14
Unique-IP document downloads: 134 times
Vixra.org is a pre-print repository rather than a journal. Articles hosted may not yet have been verified by peer-review and should be treated as preliminary. In particular, anything that appears to include financial or legal advice or proposed medical treatments should be treated with due caution. Vixra.org will not be responsible for any consequences of actions that result from any form of use of any documents on this website.
Add your own feedback and questions here:
You are equally welcome to be positive or negative about any paper but please be polite. If you are being critical you must mention at least one specific error, otherwise your comment will be deleted as unhelpful.