Portfolio optimization, hidden Markov models, and technical analysis of P and F charts

Elliott, R.Hinz, J.2006-06-192006-06-192002International Journal of Theoretical and Applied Finance, 2002; 5(4):385-3990219-02491793-6322http://hdl.handle.net/2440/460© World Scientific Publishing CompanyIn this work we introduce an adaptive method of portfolio optimization. The basic idea is to describe essential movements of the stock price using a hidden Markov model and to calculate the optimal portfolio using a recursive algorithm. The portfolio optimization is adaptive in the sense that the standard EM-algorithm fits the model to historical data, which improves the portfolio performance.enPortfolio optimizationhidden Markov models.Portfolio optimization, hidden Markov models, and technical analysis of P and F chartsJournal article002002124710.1142/S021902490200149359898