Inferring multi-period optimal portfolios via detrending moving average cluster entropy

Abstract

Despite half a century of research, there is still no general agreement about the optimal approach to build a robust multi-period portfolio. We address this question by proposing the detrended cluster entropy approach to estimate the weights of a portfolio of high-frequency market indices. The information measure gathered from the markets produces reliable estimates of the weights at varying temporal horizons. The portfolio exhibits a high level of diversity, robustness and stability as not affected by the drawbacks of traditional mean-variance approaches.