|CIRJE-F-1038||"Creating Investment Scheme with State Space Modeling "|
Nakano, Masafumi, Akihiko Takahashi and Soichiro Takahashi
|Remarks||Subsequently published in Expert Systems with Applications, Volume 81, 15 September 2017, Pages 53-66.|
This paper proposes a unified approach to creating investment strategies with various desirable properties for investors. Particularly, we provide a new interpretation and the resulting formulations for state space models to attain our investment objectives, which are possibly specified as achieving target mean-variance portfolios or Sharpe ratios, and generating alphas (additional returns) over benchmark indexes.