Our objective in this article is to study analytically the effect of borrowing constraints on asset returns. We explicitly characterize the equilibrium for an exchange economy with two agents who differ in their risk aversion and are prohibited from borrowing. In a representative-agent economy with CRRA preferences, the Sharpe ratio of equity returns and the riskfree rate are linked by the risk...

The Sharpe ratio is a measure based on the theory of mean variance, it performance portfolio when risk can be measured through standard deviation. This paper suggests Sharpe-ratio solution using second order cone programming (SOCP). We use penalty-regularized method to represent nonlinear problem. present computationally tractable way determining portfolio. A Markov chain structure employed und...

SHARPE is a well known package in the field of reliability and performability, used in universities as well as in companies. A modeler who is familiar with many different kinds of models, can easily choose models that best suit a particular system and the kind of measure that is needed at each stage of the design. It is also possible to use different kinds of models hierarchically for different...

This paper considers efficient set mathematics for the case where the covariance matrix of asset returns is assumed known but ex ante the vector of expected returns is replaced by an estimated or forecast value. It is shown that the ex post mean and variance differ from the standard results. Consequently the maximum Sharpe ratio portfolio also differs from the standard result. However, even wit...

We propose to train trading systems by optimizing financial objective functions via reinforcement learning. The performance functions that we consider are profit or wealth, the Sharpe ratio and our recently proposed differential Sharpe ratio for online learning. In Moody & Wu (1997), we presented empirical results that demonstrate the advantages of reinforcement learning relative to supervised ...