Yau's Affine-Normal Descent for Large-Scale Unrestricted Higher-Moment Portfolio Optimization
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arXiv
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| Autores principales: | , , , |
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| Formato: | Preprint |
| Publicado: |
2026
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| _version_ | 1866910173284532224 |
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| author | Wang, Ya-Juan Niu, Yi-Shuai Sheshmani, Artan Yau, Shing-Tung |
| author_facet | Wang, Ya-Juan Niu, Yi-Shuai Sheshmani, Artan Yau, Shing-Tung |
| contents | Unrestricted mean-variance-skewness-kurtosis portfolio optimization can capture asymmetry and tail risk, but sample-moment formulations become computationally impractical when the asset universe is large: they produce dense nonconvex quartic objectives with prohibitive coskewness and cokurtosis tensors and anisotropic, ill-conditioned level sets. We develop a structure-exploiting algorithm based on Yau's affine-normal descent that follows affine-normal directions of the current level set while working directly with the return matrix. The method avoids explicit higher-order tensors and exploits the quartic structure for exact sample oracles, derivative evaluation, and exact line search. We also provide theory for the reduced simplex formulation, including regularity and convexity conditions that separate data-map geometry from investor preference coefficients. Computational results show a clear implementation split: a direct configuration is effective on the standard small benchmark, whereas a preconditioned conjugate-gradient configuration with stall recovery becomes the preferred large-scale implementation by the upper end of the hundreds and remains competitive as the asset universe moves into the thousands. On a 5-minute A-share panel with 5,440 stocks, the method makes direct full-universe comparisons with exact mean-variance portfolios feasible and shows on the baseline split that the incremental value of higher moments is strongest at moderate return targets. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2604_25378 |
| institution | arXiv |
| publishDate | 2026 |
| record_format | arxiv |
| spellingShingle | Yau's Affine-Normal Descent for Large-Scale Unrestricted Higher-Moment Portfolio Optimization Wang, Ya-Juan Niu, Yi-Shuai Sheshmani, Artan Yau, Shing-Tung Portfolio Management Computational Engineering, Finance, and Science Optimization and Control Computational Finance 90C30, 90C26, 90C06, 90C23, 91G10, 65K05 Unrestricted mean-variance-skewness-kurtosis portfolio optimization can capture asymmetry and tail risk, but sample-moment formulations become computationally impractical when the asset universe is large: they produce dense nonconvex quartic objectives with prohibitive coskewness and cokurtosis tensors and anisotropic, ill-conditioned level sets. We develop a structure-exploiting algorithm based on Yau's affine-normal descent that follows affine-normal directions of the current level set while working directly with the return matrix. The method avoids explicit higher-order tensors and exploits the quartic structure for exact sample oracles, derivative evaluation, and exact line search. We also provide theory for the reduced simplex formulation, including regularity and convexity conditions that separate data-map geometry from investor preference coefficients. Computational results show a clear implementation split: a direct configuration is effective on the standard small benchmark, whereas a preconditioned conjugate-gradient configuration with stall recovery becomes the preferred large-scale implementation by the upper end of the hundreds and remains competitive as the asset universe moves into the thousands. On a 5-minute A-share panel with 5,440 stocks, the method makes direct full-universe comparisons with exact mean-variance portfolios feasible and shows on the baseline split that the incremental value of higher moments is strongest at moderate return targets. |
| title | Yau's Affine-Normal Descent for Large-Scale Unrestricted Higher-Moment Portfolio Optimization |
| topic | Portfolio Management Computational Engineering, Finance, and Science Optimization and Control Computational Finance 90C30, 90C26, 90C06, 90C23, 91G10, 65K05 |
| url | https://arxiv.org/abs/2604.25378 |