# Strategic Bayesian Asset Allocation

arXiv: https://arxiv.org/abs/1905.08414 · HTML: https://mlsanity.com/paper/1905.08414/

## Key facts

- Cited by 1 papers in the map (data through 14 Oct 2026).
- First posted on arXiv 21 May 2019.

## Built on by (most cited first, 1 of 1)

- [Injective flows for star-like manifolds](https://mlsanity.com/paper/2406.09116/) (2024)

## Abstract (arXiv)

Strategic asset allocation requires an investor to select stocks from a given basket of assets. The perspective of our investor is to maximize risk-adjusted alpha returns relative to a benchmark index. Historical returns are used to provide inputs into an optimization algorithm. Our approach uses Bayesian regularization to not only provide stock selection but also optimal sequential portfolio weights. By incorporating investor preferences with a number of different regularization penalties we extend the approaches of Black (1992) and Puelz (2015). We tailor standard sparse MCMC algorithms to calculate portfolio weights and perform selection. We illustrate our methodology on stock selection from the SP100 stock index and from the top fifty holdings of two hedge funds Renaissance Technologies and Viking Global. Finally, we conclude with directions for future research.