Portfolio Selection via Subset Resampling


  • Weiwei Shen GE Global Research Center
  • Jun Wang East China Normal University




Portfolio, Resampling


As the cornerstone of the modern portfolio theory, Markowitz's mean-variance optimization is a major model adopted in portfolio management. However, the estimation errors in its input parameters substantially deteriorate its performance in practice. Specifically, loss could be huge when the number of assets for investment is not much smaller than the sample size of historical data. To hasten the applicability of Markowitz's portfolio optimization to large portfolios, in this paper, we propose a new portfolio strategy via subset resampling. Through resampling subsets of the original large universe of assets, we construct the associated subset portfolios with more accurately estimated parameters without requiring additional data. By aggregating a number of constructed subset portfolios, we attain a well-diversified portfolio of all assets. To investigate its performance, we first analyze its corresponding efficient frontiers by simulation, provide analysis on the hyperparameter selection, and then empirically compare its out-of-sample performance with those of various competing strategies on diversified datasets. Experimental results corroborate that the proposed portfolio strategy has marked superiority in extensive evaluation criteria.




How to Cite

Shen, W., & Wang, J. (2017). Portfolio Selection via Subset Resampling. Proceedings of the AAAI Conference on Artificial Intelligence, 31(1). https://doi.org/10.1609/aaai.v31i1.10728



Main Track: Machine Learning Applications