DOS Seminar

Event Details
  • Date/Time:
    • Wednesday January 21, 2015 - Thursday January 22, 2015
      11:00 am - 11:59 am
  • Location: Advisory Board Room 402 Groseclose
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Summary Sentence: DOS Seminar

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TITLE:  Multi-period portfolio optimization with alpha decay

SPEAKER: Kartik Sivaramakrishnan


The traditional Markowitz mean-variance framework is based on a single-period portfolio model. Single-period portfolio optimization does not use any data and decisions beyond the rebalancing time horizon with the result that that its policies are "myopic" in nature. For long-term investors, multiperiod optimization offers the opportunity to make "wait-and-see" policy decisions by including approximate forecasts and long-term policy decisions beyond the rebalancing time horizon.

We consider portfolio optimization with a composite alpha signal that is composed of a short-term and a long-term alpha signal. The short-term alpha better predicts returns at the end of the rebalancing period but it decays quickly. On the other hand, the long-term alpha has less predictive power than the short-term alpha but it decays slowly. We develop a two-stage multi-period model that incorporates this alpha model to construct the optimal portfolio at the end of the rebalancing period. We compare this model with the traditional single-period MVO model on simulated and realistic backtests and show that the multi-period model generates portfolios with superior realized performance.


Short Bio:

Kartik Sivaramakrishnan is a Senior Research Associate at Axioma where he maintains Axioma's flagship portfolio optimizer that offers the most flexible construction tool in the market. Kartik is interested in developing second-order mixed-integer portfolio models, and interior point algorithms and associated software for solving these models in a high performance computing environment. He also researches the applications of these models in improving the investment process in practice. Most recently he was involved in developing the NASDAQ-Axioma commodity indexes that track Oil, Gold, and a basket of agricultural products. 

Prior to joining Axioma, Kartik was a tenure-track Assistant Professor in the Department of Mathematics and affiliated with the Operations Research program at North Carolina State University in Raleigh. Kartik has a Ph.D. in Applied Mathematics from Rensselaer Polytechnic Institute and a Masters degree in Electrical Engineering from the Indian Institute of Science in Bangalore. His research has been published in optimization, OR, and practitioner journals.

Additional Information

In Campus Calendar

School of Industrial and Systems Engineering (ISYE)

Invited Audience
Undergraduate students, Faculty/Staff, Graduate students
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  • Created By: Anita Race
  • Workflow Status: Published
  • Created On: Jan 13, 2015 - 11:16am
  • Last Updated: Apr 13, 2017 - 5:20pm