2024/10/29 by Cotton, Peter · 1 citation
#91G10 #FOS: Economics and business #J.4 #Mathematical Finance (q-fin.MF) #Portfolio Management (q-fin.PM)
paper · doi:10.48550/arxiv.2411.05807
Despite many attempts to make optimization-based portfolio construction in the spirit of Markowitz robust and approachable, it is far from universally adopted. Meanwhile, the collection of more heuristic divide-and-conquer approaches was revitalized by Lopez de Prado where Hierarchical Risk Parity (HRP) was introduced. This paper reveals the hidden connection between these seemingly disparate approaches.