Active Portfolio Management with Conditioning Information

Abstract

In this article, the authors propose an efficient and practical portfolio management methodology in which portfolio weights are determined by several market observations. Their method is based on the managed portfolio construction technique, which makes it tractable for fund managers. The key points of this work are as follows: (i) to impose constraints on active weights against the prespecified benchmark weights, and (ii) to show empirically that the constraints stabilize and improve portfolio performance by conducting backtests.