Answers are grounded in this paper and cite their sources.
This randomized trial finds improved portfolio allocation through a new local dependence measure, suggesting significant advantages for investors.
It is well known that there are asymmetric dependence structures between returns. In this paper we use a new nonparametric measure of local, the local Gaussian correlation, to improve portfolio allocation. We the classical mean-variance framework, and show that the portfolio is straightforward using our new approach, only relying on a parameter (the bandwidth). The new method is shown to outperform the weighted (1/N) portfolio and the classical Markowitz portfolio for asset returns data.
No takes yet. Share an insight, caveat, or question.
Sleire et al. (2021) studied this question.
Synapse has enriched 8 closely related papers on similar clinical questions. Consider them for comparative context: