Portfolio Rho-presentativity

Maximally ρ-presentative portfolios maximize under no constraint an aggregation of their vector of exposure to all assets, that is measured by a symmetric, increasing and concave real-valued function f. We provide a basic... [ view full abstract ]

Maximally ρ-presentative portfolios maximize under no constraint an aggregation of their vector of exposure to all assets, that is measured by a symmetric, increasing and concave real-valued function f.

We provide a basic characterization of these portfolios that is independent of f, show that they are long-only, rare and form a union of polytopes that contains well-known long-only portfolios.

This also leads to a correspondence between some classic long-only portfolio optimization problems constrained to have maximum weights and unconstrained problems, thus characterizing the impact on the objective of these constraints often used by practitioners. Finally, several applications illustrate our results.