Digital spectral analysis: with applications
Digital spectral analysis: with applications
Stochastic network optimization models for investment planning
Annals of Operations Research
Applying the progressive hedging algorithm to stochastic generalized networks
Annals of Operations Research
Stochastic network programming for financial planning problems
Management Science - Focused issue on financial modeling
Multi-stage stochastic linear programs for portfolio optimization
Annals of Operations Research
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The Modern Portfolio Theory of Markowitz maximized portfolio expected return subject to holding total portfolio variance below a selected level. Digital Portfolio Theory is an extension of Modern Portfolio Theory, with the added dimension of memory. Digital Portfolio Theory decomposes the portfolio variance into independent components using the signal processing decomposition of variance. The risk or variance of each security's return process is represented by multiple periodic components. These periodic variance components are further decomposed into systematic and unsystematic parts relative to a reference index. The Digital Portfolio Theory model maximizes portfolio expected return subject to a set of linear constraints that control systematic, unsystematic, calendar and non-calendar variance. The paper formulates a single period, digital signal processing, portfolio selection model using cross-covariance constraints to describe covariance and autocorrelation characteristics. Expected calendar effects can be optimally arbitraged by controlling the memory or autocorrelation characteristics of the efficient portfolios. The Digital Portfolio Theory optimization model is compared to the Modern Portfolio Theory model and is used to find efficient portfolios with zero calendar risk for selected periods.