Multi-asset portfolio model optimization based on mean multifractal detrended cross correlation analysis

Abstract

In order to make the constructed investment portfolio model better adapt to the actual securities market, this paper incorporates the multifractal correlations into the portfolio model of multi-risk assets optimization. On the basis of using variable detrended covariance to measure multifractal correlations, the variable detrended covariance is embedded into the reward-risk criterion, the mean multifractal detrended cross correlation analysis portfolio (M-D) model of multi-risk assets is constructed, and the analytical solution of the M-D model of multi-risk assets is given. The empirical analysis shows that the M-D model not only can improve investment performance but also meet the return-risk criterion much more, reaching the goal of optimizing the multi-risk asset portfolio model.

Keywords

• Portfolio model optimization
• variable order fluctuation function
• multifractal correlations