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Robust portfolio construction controlling the alpha-weight angle
Includes abstract.
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| Other Authors: | |
| Format: | Thesis |
| Language: | English |
| Published: |
Division of Actuarial Science
2014
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| _version_ | 1867613460771110913 |
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| access_status_str | Open Access |
| author | Bailey, Geraldine |
| author2 | Bradfield, Dave |
| author_browse | Bailey, Geraldine Bradfield, Dave |
| author_facet | Bradfield, Dave Bailey, Geraldine |
| author_sort | Bailey, Geraldine |
| collection | Thesis |
| description | Includes abstract. |
| format | Thesis |
| id | oai:open.uct.ac.za:11427/5812 |
| institution | University of Cape Town (South Africa) |
| language | eng |
| last_indexed | 2026-06-10T12:36:30.512Z |
| license_str | Not specified — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from UCTD — University of Cape Town Open Access Repository |
| publishDate | 2014 |
| publishDateRange | 2014 |
| publishDateSort | 2014 |
| publisher | Division of Actuarial Science |
| publisherStr | Division of Actuarial Science |
| record_format | dspace |
| source_str | UCTD — University of Cape Town Open Access Repository |
| spelling | oai:open.uct.ac.za:11427/5812 Robust portfolio construction controlling the alpha-weight angle Bailey, Geraldine Bradfield, Dave Mathematical Finance Includes abstract. Includes bibliographical references. Estimation risk is widely seen to have a significant impact on mean-variance portfolios and is one of the major reasons the standard Markowitz theory has been criticized in practice. While several attempts to incorporate estimation risk has been considered in the past, the approach by of Golts and Jones (2009) represents an innovative approach to incorporate estimation risk in the sample estimates of the input returns and covariance matrix. In this project we discuss the theory introduced by Golts and Jones (2009) which looks at the direction and the magnitude of the vector of optimal weight and investigates them separately, with focus on the former. We demystify the theory of the authors with focus on both mathematical reasoning and practical application. We show that the distortions of the mean-variance optimization process can be quantified by considering the angle between the vector of expected returns and the vector of optimized portfolio positions. Golts and Jones (2009) call this the alpha-weight angle. We show how to control this angle by employing robust optimization techniques, which we also explore as a main focus in this project. We apply this theory to the South African market and show that we can indeed obtain portfolios with lower risk statistics especially so in times of economic crisis. 2014-07-31T12:30:06Z 2014-07-31T12:30:06Z 2013 Master Thesis Masters MPhil http://hdl.handle.net/11427/5812 eng application/pdf Division of Actuarial Science Faculty of Commerce University of Cape Town |
| spellingShingle | Mathematical Finance Bailey, Geraldine Robust portfolio construction controlling the alpha-weight angle |
| thesis_degree_str | Master's |
| title | Robust portfolio construction controlling the alpha-weight angle |
| title_full | Robust portfolio construction controlling the alpha-weight angle |
| title_fullStr | Robust portfolio construction controlling the alpha-weight angle |
| title_full_unstemmed | Robust portfolio construction controlling the alpha-weight angle |
| title_short | Robust portfolio construction controlling the alpha-weight angle |
| title_sort | robust portfolio construction controlling the alpha weight angle |
| topic | Mathematical Finance |
| url | http://hdl.handle.net/11427/5812 |
| work_keys_str_mv | AT baileygeraldine robustportfolioconstructioncontrollingthealphaweightangle |