USING INTRINSIC TIME IN PORTFOLIO OPTIMIZATION
Abstract
The concept of intrinsic time was introduced in Mandelbrot’s paper circa 1963 and further developed in discussion paper by Muller et al. (1993). As reported by Didenko et al. (2014), there are some evidencesthat sampling price series in volume domain results in almost normal returns, which could help to overcome some common issues in portfolio optimisation. First, we briefly survey flaws of classic approach to portfolio optimisation, then we test for statistical properties of intrinsic-time sampled return series, theorize on how intrinsic time could help in handling issues of portfolio optimisation, and then empirically test our guesses. We show that using intrinsic time helps in overcoming such flaws of Modern Portfolio Theory as poor diversification and reliance on normality of returns.
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Review
For citations:
Vasilyev B. USING INTRINSIC TIME IN PORTFOLIO OPTIMIZATION. Review of Business and Economics Studies. 2015;3(2):7-14. (In Russ.)
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