Luca Ghezzi

The stage of strategic asset allocationisthe most important one in a process of portfolio management. Asset classes are to be selected and percent target weights are to be set. Careful decision-making benefits from the computation of an efficient frontier. In this work, a single investment is considered with all coupons and dividends being reinvested. Percent weights are supposed to be nonnegative and subject to annual rebalancing. Portfolio returns are assumed to be time uncorrelated and lognormal. Linear quadratic optimization is complemented with a lognormal mapping, resulting in a rigorous procedure, where by efficient portfolios based on linear returns may turn into efficient portfolios based on logarithmic returns. Two data sets are used by way of illustration under the tentative yet usual assumption that forecast moments are the same as historical moments. The former data set includes the annual total returns of three US asset classes for the years 1872-2012. The latter includes the annual total returns offour equity or equity-like asset classes for the years 1972-2017. The efficient frontier based on logarithmic returns is upward sloping in both instances, stretching from a portfolio with global minimum-variance to a portfolio with global maximum-variance. Nonetheless, if short selling and hence negative weights were allowed, the efficient frontier based on logarithmic returns wouldn't be upward sloping in the latter instance. The null hypothesis of lognormal returns is tested. It is always rejected in the latter data set; it is either provisionally accepted or rejected in the former data set, depending on the specific efficient portfolio. An interpretation of the statistical evidence is provided.

An insightfulproblem of passive managementis considered, where an aggregate portfolio is rebalanced annually to restore the percent weights of its strategic asset allocation. Asits annual total returns are assumed to be time uncorrelatedand lognormally distributed, multi-period optimization boils down to single period optimization. Expanding on previous theoretical results, it is shown how a minimum-variance set based on linear returns turns into a minimum-variance set based on logarithmic returns. More precisely, inefficient portfolios based on linear returns cannot turn into efficient portfolios based on logarithmic returns, whereas efficient portfolios based on linear returns can also turn into inefficient portfolios based on logarithmic returns. In the latter instance, there can be two different qualitative patterns, both of which are portrayed by using historical data. Moreover, a dynamic shortfall constraint is introduced. Each threshold return can be turned into a threshold accumulation that has the same shortfall probability; coeteris paribus, the more distant the time horizon, the smaller the shortfall probability. As our procedure is analytically tractable, it might be operationally useful, especially to financial advisors and institutional investors.

The use of an efficient frontier is considered within a problem of portfolio management. An aggregate portfolio is rebalanced annually to restore the percent weights of its strategic asset allocation; its annual total returns are assumed to be independent and lognormally distributed. Expanding on a previous paper, it is shown how a minimum-variance set based on ordinary returns turns into a minimum-variance set based on logarithmic returns. Remarkably, both sets have a similar shape. Moreover, it is pointed out how both a long-term expected accumulation and its confidence interval can be determined by virtue of such a mapping. A case in point is provided by using the annual total returns of 3 US asset classes for the years 1926-1997 under the usual simplifying assumption that population moments are the same as historical moments. As the procedure is analytically tractable, it might be operationally useful, especially to financial advisors and institutional investors.

The paper aims at identifying the effects exerted by a tax levy on an overexploited and previously unregulated fishery. The analysis is carried out by means of a dynamic model, which includes the fish stock, the harvesting effort and the price for fish as state-variables; attention is focused on the roles played by both the demand elasticity and the open access externality. According to the analysis, the standard results provided by the received microeconomic theory are remarkably modified. In the long run a higher amount is sold at a lower price regardless of demand elasticity.

È frequente tra gli operatori il ricorso alla seguente regola di comportamento: detenere portafogli obbligazionari con ridotta (consistente) durata finanziaria se si prevede un rialzo (ribasso) dei tassi di interesse. Il presente lavoro esamina l'affidabilità di tale regola quando l'aggiustamento dei tassi non avvenga istantaneamente ma richieda invece una significativa quantità di tempo. L'analisi considera specificatamente il caso di obbligazioni senza cedola e di struttura per scadenze piatta.

This paper presents the preliminary results concerning the design of a cooperative architecture of a knowledge-based system for financial advice giving. The chosen application domain is portfolio selection. The described architecture consists of three main areas (interaction and dialogue, database access, and portfolio selection), which interact through a dedicated cooperation mechanism, encompassing the issues of control, communication, and scheduling.