High order universal portfolios

Gabriel Turinici ()
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Gabriel Turinici: Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres

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Abstract: The Cover universal portfolio has many interesting theoretical and numerical properties and was investigated for a long time. Building on it, we explore what happens when we add this UP to the market as a new synthetic asset and construct by recurrence higher order UPs. We investigate some important theoretical properties of the high order UPs and show in particular that they are indeed different from the Cover UP and are capable to break the time permutation invariance. We show that under some perturbation regime the second order UP has better Sharp ratio than the standard UP and briefly investigate arbitrage opportunities thus created. Numerical experiences on a benchmark from the literature confirm that high order UPs improve Cover's UP performances.

Date: 2025-08-13
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Published in Decisions in Economics and Finance, 2025, ⟨10.1007/s10203-025-00535-8⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05211982

DOI: 10.1007/s10203-025-00535-8

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