Diversified minimum-variance portfolios

摘要

We build on a one parameter family of weighting schemes arising from L~2-constrained portfolio optimization problems. The parameter allows to fine tune the trade-off between the volatility and the diversification of the portfolio. We propose two criteria in order to determine two unique portfolios: the first criterion requires that no weights be negative while the second one imposes a target diversification which is median between full concentration and full diversification. Both portfolios are empirically compared to classical benchmarks. The first one behaves very much like other popular Long-Only weighting schemes while the second displays a more aggressive profile, while generating moderate turnover. We also discuss implementation issues, as well as estimation related problems.