A market portfolio is a portfolio in which each asset is held at a weight proportional to its market value. A swap portfolio is a portfolio in which each one of a pair of assets is held at a weight proportional to the market value of the other . A reverse-weighted index portfolio is a portfolio in which the weights of the market portfolio are swapped pairwise by rank. Swap portfolios are functionally generated, and in a coherent market they have higher asymptotic growth rates than the market portfolio. Although reverse-weighted portfolios with two or more pairs of assets are not functionally generated, in a market represented by a first-order model with symmetric variances, they will grow faster than the market portfolio . This result is applied to a market of commodity futures, where we show that the reverse price-weighted portfolio substantially outperforms the price-weighted portfolio from 1977-2018.
A market portfolio is a portfolio in which each asset is held at a weight proportional to its market value. Functionally generated portfolios are portfolios for which the logarithmic return relative to the market portfolio can be decomposed into a function of the market weights and a process of locally finite variation, and this decomposition is convenient for characterizing the long-term behavior of the portfolio. A permutation-weighted portfolio is a portfolio in which the assets are held at weights proportional to a permutation of their market values, and such a portfolio is functionally generated only for markets with two assets (except for the identity permutation) . A reverse-weighted portfolio is a portfolio in which the asset with the greatest market weight is assigned the smallest market weight, the asset with the second-largest weight is assigned the second-smallest, and so forth. Although the reverse-weighted portfolio in a market with four or more assets is not functionally generated, it is still possible to characterize its long-term behavior using rank-based methods . This result is applied to a market of commodity futures, where we show that the reverse price-weighted portfolio substantially outperforms the price-weighted portfolio from 1977-2018.
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Functionally generated portfolios are portfolios for which the logarithmic return relative to the market portfolio can be decomposed into a function of the market weights and a process of locally finite variation, and this decomposition is convenient for characterizing the long-term behavior of the portfolio. A permutation-weighted
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each one of a pair of assets is held at a weight proportional to the market value of the other
the assets are held at weights proportional to a permutation of their market values, and such a portfolio is functionally generated only for markets with two assets (except for the identity permutation)
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index
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weights of the market portfolio are swapped pairwise by rank. Swap portfolios are functionally generated, and in a coherent market they have higher asymptotic growth rates than the market portfolio. Although
asset with the greatest market weight is assigned the smallest market weight, the asset with the second-largest weight is assigned the second-smallest, and so forth. Although the
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portfolios with two or more pairs of assets are
portfolio in a market with four or more assets is
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in a market represented by a first-order model with symmetric variances, they will grow faster than the market portfolio
it is still possible to characterize its long-term behavior using rank-based methods