Department of Mathematics
 Search | Help | Login | pdf version | printable version

Math @ Duke



Publications [#287188] of Ingrid Daubechies

Papers Published

  1. Brodie, J; Daubechies, I; De Mol, C; Giannone, D; Loris, I, Sparse and stable Markowitz portfolios., Proceedings of the National Academy of Sciences of the United States of America, vol. 106 no. 30 (July, 2009), pp. 12267-12272 [19617537], [doi]
    (last updated on 2019/09/23)

    We consider the problem of portfolio selection within the classical Markowitz mean-variance framework, reformulated as a constrained least-squares regression problem. We propose to add to the objective function a penalty proportional to the sum of the absolute values of the portfolio weights. This penalty regularizes (stabilizes) the optimization problem, encourages sparse portfolios (i.e., portfolios with only few active positions), and allows accounting for transaction costs. Our approach recovers as special cases the no-short-positions portfolios, but does allow for short positions in limited number. We implement this methodology on two benchmark data sets constructed by Fama and French. Using only a modest amount of training data, we construct portfolios whose out-of-sample performance, as measured by Sharpe ratio, is consistently and significantly better than that of the naïve evenly weighted portfolio.
ph: 919.660.2800
fax: 919.660.2821

Mathematics Department
Duke University, Box 90320
Durham, NC 27708-0320