The Portfolio Optimization Machine

less than 1 minute read

In 2018, guys at ReSolve Asset Management published the paper Portfolio Optimization: A General Framework for Portfolio Choice in which they describe

a stepwise framework for investors to choose the most optimal way to form portfolios, as a direct expression of their beliefs and assumptions.

In particular, they introduce the following decision tree:

Portfolio Optimization Machine decision tree
The Portfolio Optimization Machine decision tree, source: ReSolve Asset Management

Since I discovered this decision tree, it has been one of my objectives to make the mentioned portfolio optimization algorithms available to as many people as possible:

  • Mean-Variance Optimization
  • Minimum Variance Portfolio
  • Market Cap Portfolio
  • Maximum Diversification Portfolio
  • Equal Risk Contribution Portfolio
  • Equal Sharpe Ratio Portfolio (that I understood as Equal Sharpe Ratio Contribution Portfolio)
  • Inverse Volatility Weighted Portfolio
  • Equal Weight Portfolio
  • Max Decorrelation Portfolio
  • Inverse Variance Weighted Portfolio

Entering 2021, I am proud to announce that this is now done: all the above portfolio optimization algorithms are available as endpoints of Portfolio Optimizer!

The documentation of these APIs is available there.

Happy new year 2021.