Identifying Small Mean Reverting Portfolios

@article{dAspremont2007IdentifyingSM,
  title={Identifying Small Mean Reverting Portfolios},
  author={Alexandre d'Aspremont},
  journal={CoRR},
  year={2007},
  volume={abs/0708.3048}
}
Given multivariate time series, we study the problem of form ing portfolios with maximum mean reversion while constraining the number of assets in th ese portfolios. We show that it can be formulated as a sparse canonical correlation analysi s and study various algorithms to solve the corresponding sparse generalized eigenvalue pro blems. After discussing penalized parameter estimation procedures, we study the sparsity ver sus predictability tradeoff and the impact of predictability in various… CONTINUE READING
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