A comprehensive portfolio construction under stochastic environment

Prior research has established that idiosyncratic volatility of the securities prices exhibits a positive trend. This trend and other factors have made the merits of investment diversification and portfolio construction more compelling. ^ A new optimization technique, a greedy algorithm, is proposed to optimize the weights of assets in a portfolio. The main benefits of using this algorithm are to: (a) increase the efficiency of the portfolio optimization process, (b) implement large-scale optimizations, and (c) improve the resulting optimal weights. In addition, the technique utilizes a novel approach in the construction of a time-varying covariance matrix. This involves the application of a modified integrated dynamic conditional correlation GARCH (IDCC - GARCH) model to account for the dynamics of the conditional covariance matrices that are employed. ^ The stochastic aspects of the expected return of the securities are integrated into the technique through Monte Carlo simulations. Instead of representing the expected returns as deterministic values, they are assigned simulated values based on their historical measures. The time-series of the securities are fitted into a probability distribution that matches the time-series characteristics using the Anderson-Darling goodness-of-fit criterion. Simulated and actual data sets are used to further generalize the results. Employing the S&P500 securities as the base, 2000 simulated data sets are created using Monte Carlo simulation. In addition, the Russell 1000 securities are used to generate 50 sample data sets. ^ The results indicate an increase in risk-return performance. Choosing the Value-at-Risk (VaR) as the criterion and the Crystal Ball portfolio optimizer, a commercial product currently available on the market, as the comparison for benchmarking, the new greedy technique clearly outperforms others using a sample of the S&P500 and the Russell 1000 securities. The resulting improvements in performance are consistent among five securities selection methods (maximum, minimum, random, absolute minimum, and absolute maximum) and three covariance structures (unconditional, orthogonal GARCH, and integrated dynamic conditional GARCH). ^

A Comprehensive Portfolio Construction Under Stochastic Environment

Prior research has established that idiosyncratic volatility of the securities prices exhibits a positive trend. This trend and other factors have made the merits of investment diversification and portfolio construction more compelling. A new optimization technique, a greedy algorithm, is proposed to optimize the weights of assets in a portfolio. The main benefits of using this algorithm are to: a) increase the efficiency of the portfolio optimization process, b) implement large-scale optimizations, and c) improve the resulting optimal weights. In addition, the technique utilizes a novel approach in the construction of a time-varying covariance matrix. This involves the application of a modified integrated dynamic conditional correlation GARCH (IDCC - GARCH) model to account for the dynamics of the conditional covariance matrices that are employed. The stochastic aspects of the expected return of the securities are integrated into the technique through Monte Carlo simulations. Instead of representing the expected returns as deterministic values, they are assigned simulated values based on their historical measures. The time-series of the securities are fitted into a probability distribution that matches the time-series characteristics using the Anderson-Darling goodness-of-fit criterion. Simulated and actual data sets are used to further generalize the results. Employing the S&P500 securities as the base, 2000 simulated data sets are created using Monte Carlo simulation. In addition, the Russell 1000 securities are used to generate 50 sample data sets. The results indicate an increase in risk-return performance. Choosing the Value-at-Risk (VaR) as the criterion and the Crystal Ball portfolio optimizer, a commercial product currently available on the market, as the comparison for benchmarking, the new greedy technique clearly outperforms others using a sample of the S&P500 and the Russell 1000 securities. The resulting improvements in performance are consistent among five securities selection methods (maximum, minimum, random, absolute minimum, and absolute maximum) and three covariance structures (unconditional, orthogonal GARCH, and integrated dynamic conditional GARCH).

Dynamic data retrieval on the World Wide Web

Methods for accessing data on the Web have been the focus of active research over the past few years. In this thesis we propose a method for representing Web sites as data sources. We designed a Data Extractor data retrieval solution that allows us to define queries to Web sites and process resulting data sets. Data Extractor is being integrated into the MSemODB heterogeneous database management system. With its help database queries can be distributed over both local and Web data sources within MSemODB framework. ^ Data Extractor treats Web sites as data sources, controlling query execution and data retrieval. It works as an intermediary between the applications and the sites. Data Extractor utilizes a twofold “custom wrapper” approach for information retrieval. Wrappers for the majority of sites are easily built using a powerful and expressive scripting language, while complex cases are processed using Java-based wrappers that utilize specially designed library of data retrieval, parsing and Web access routines. In addition to wrapper development we thoroughly investigate issues associated with Web site selection, analysis and processing. ^ Data Extractor is designed to act as a data retrieval server, as well as an embedded data retrieval solution. We also use it to create mobile agents that are shipped over the Internet to the client's computer to perform data retrieval on behalf of the user. This approach allows Data Extractor to distribute and scale well. ^ This study confirms feasibility of building custom wrappers for Web sites. This approach provides accuracy of data retrieval, and power and flexibility in handling of complex cases. ^

Design of a dynamic e-commerce system with engineering applications

The primary purpose of this thesis was to design and develop a prototype e-commerce system where dynamic parameters are included in the decision-making process and execution of an online transaction. The system developed and implemented takes into account previous usage history, priority and associated engineering capabilities. The system was developed using three-tiered client server architecture. The interface was the Internet browser. The middle tiered web server was implemented using Active Server Pages, which form a link between the client system and other servers. A relational database management system formed the data component of the three-tiered architecture. It includes a capability for data warehousing which extracts needed information from the stored data of the customers as well as their orders. The system organizes and analyzes the data that is generated during a transaction to formulate a client's behavior model during and after a transaction. This is used for making decisions like pricing, order rescheduling during a client's forthcoming transaction. The system helps among other things to bring about predictability to a transaction execution process, which could be highly desirable in the current competitive scenario.

Dynamic data retrieval on the world wide web

Methods for accessing data on the Web have been the focus of active research over the past few years. In this thesis we propose a method for representing Web sites as data sources. We designed a Data Extractor data retrieval solution that allows us to define queries to Web sites and process resulting data sets. Data Extractor is being integrated into the MSemODB heterogeneous database management system. With its help database queries can be distributed over both local and Web data sources within MSemODB framework. Data Extractor treats Web sites as data sources, controlling query execution and data retrieval. It works as an intermediary between the applications and the sites. Data Extractor utilizes a two-fold "custom wrapper" approach for information retrieval. Wrappers for the majority of sites are easily built using a powerful and expressive scripting language, while complex cases are processed using Java-based wrappers that utilize specially designed library of data retrieval, parsing and Web access routines. In addition to wrapper development we thoroughly investigate issues associated with Web site selection, analysis and processing. Data Extractor is designed to act as a data retrieval server, as well as an embedded data retrieval solution. We also use it to create mobile agents that are shipped over the Internet to the client's computer to perform data retrieval on behalf of the user. This approach allows Data Extractor to distribute and scale well. This study confirms feasibility of building custom wrappers for Web sites. This approach provides accuracy of data retrieval, and power and flexibility in handling of complex cases.