Skip to main content

Main menu

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JPM
    • Awards
    • Editorial Board
    • Published Ahead of Print (PAP)
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

User menu

  • Sample our Content
  • Subscribe Now
  • Log in

Search

  • ADVANCED SEARCH: Discover more content by journal, author or time frame
The Journal of Portfolio Management
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Sample our Content
  • Subscribe Now
  • Log in
The Journal of Portfolio Management

The Journal of Portfolio Management

ADVANCED SEARCH: Discover more content by journal, author or time frame

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JPM
    • Awards
    • Editorial Board
    • Published Ahead of Print (PAP)
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

Nonlinear Trading Rules for Portfolio Management

Richard Grinold
The Journal of Portfolio Management Fall 2018, 45 (1) 62-70; DOI: https://doi.org/10.3905/jpm.2018.45.1.062
Richard Grinold
is a founding shareholder and advisory board member of Vinva Investment Management in Sydney, Australia
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • Article
  • Info & Metrics
  • PDF (Subscribers Only)
Loading

Click to login and read the full article.
Don’t have access? Sign up today to begin your trial to the PMR platform 

Abstract

The author continues his study of dynamic portfolio management published in an earlier issue of this journal. The approach considers each asset in isolation and finds the best trading policy for the asset within a prespecified class of policies. An earlier article considered linear trading rules and developed the notion of a target portfolio—a position we would prefer to hold given a single cost-free trade. The target is in motion, driven by changes in a collection of signals that are assumed to be correlated with future asset returns. In this article, the author expands the class of policies to include piecewise linear policies for three defined ranges (buy, hold, sell) and defined responses in the buy and sell regions. The policy driver is the difference between the target position and the current position, known as the backlog. If the backlog is small enough in absolute value, we are in the no-trade zone, and the policy prescription is hold. If the backlog is larger than the positive no-trade zone, the policy buys a fraction of excess and thus moves part of the way toward the boundary of the no-trade zone. The situation is symmetric in the sell case. The policy is defined by two parameters: the size of the no-trade zone and the fraction of the excess that is purchased (sold). The focus on one asset and a two-parameter policy class allows one to find good solutions to an otherwise intractable problem. The state space for the problem is the position of the asset and the values of the signals. The technique is scalable: Problems have been solved with over 3,000 assets and over 30 signals per asset. The resulting policy can then be folded into a single-stage multiasset optimization, in effect embedding the optimal dynamic policy into the static optimization.

  • © 2018 Pageant Media Ltd
View Full Text

Don’t have access? Register today to begin unrestricted access to our database of research.

Log in using your username and password

Forgot your user name or password?
PreviousNext
Back to top

Explore our content to discover more relevant research

  • By topic
  • Across journals
  • From the experts
  • Monthly highlights
  • Special collections

In this issue

The Journal of Portfolio Management: 45 (1)
The Journal of Portfolio Management
Vol. 45, Issue 1
Fall 2018
  • Table of Contents
  • Index by author
Print
Download PDF
Article Alerts
Sign In to Email Alerts with your Email Address
Email Article

Thank you for your interest in spreading the word on The Journal of Portfolio Management.

NOTE: We only request your email address so that the person you are recommending the page to knows that you wanted them to see it, and that it is not junk mail. We do not capture any email address.

Enter multiple addresses on separate lines or separate them with commas.
Nonlinear Trading Rules for Portfolio Management
(Your Name) has sent you a message from The Journal of Portfolio Management
(Your Name) thought you would like to see the The Journal of Portfolio Management web site.
CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.
Citation Tools
Nonlinear Trading Rules for Portfolio Management
Richard Grinold
The Journal of Portfolio Management Oct 2018, 45 (1) 62-70; DOI: 10.3905/jpm.2018.45.1.062

Citation Manager Formats

  • BibTeX
  • Bookends
  • EasyBib
  • EndNote (tagged)
  • EndNote 8 (xml)
  • Medlars
  • Mendeley
  • Papers
  • RefWorks Tagged
  • Ref Manager
  • RIS
  • Zotero
Save To My Folders
Share
Nonlinear Trading Rules for Portfolio Management
Richard Grinold
The Journal of Portfolio Management Oct 2018, 45 (1) 62-70; DOI: 10.3905/jpm.2018.45.1.062
del.icio.us logo Digg logo Reddit logo Twitter logo CiteULike logo Facebook logo Google logo LinkedIn logo Mendeley logo
Tweet Widget Facebook Like LinkedIn logo

Jump to section

  • Article
    • Abstract
    • ZERO-COST AND TARGET SIGNAL WEIGHTS
    • MOTIVATION: A SINGLE-PERIOD MODEL
    • SIMULATION/OPTIMIZATION9
    • VALIDATION
    • TCAF: A STATIC BENCHMARK
    • NLTR RESULTS
    • THE PARAMETER MODEL
    • IMPLEMENTATION
    • SUMMARY
    • ENDNOTES
    • REFERENCES
  • Info & Metrics
  • PDF (Subscribers Only)
  • PDF (Subscribers Only)

Similar Articles

Cited By...

  • No citing articles found.
  • Google Scholar
LONDON
One London Wall, London, EC2Y 5EA
United Kingdom
+44 207 139 1600
 
NEW YORK
41 Madison Avenue, New York, NY 10010
USA
+1 646 931 9045
pm-research@pageantmedia.com
 

Stay Connected

  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

MORE FROM PMR

  • News
  • Awards
  • Investment Guides
  • Videos
  • About PMR

INFORMATION FOR

  • Academics
  • Agents
  • Authors
  • Content Usage Terms

GET INVOLVED

  • Advertise
  • Publish
  • Article Licensing
  • Contact Us
  • Subscribe Now
  • Sign In
  • Update your profile
  • Give us your feedback

© 2021 Pageant Media Ltd | All Rights Reserved | ISSN: 0095-4918 | E-ISSN: 2168-8656

  • Site Map
  • Terms & Conditions
  • Privacy Policy
  • Cookies