Ting-Kam Leonard Wong (University of Toronto)

Department Colloquium

Speaker: Ting-Kam Leonard Wong (University of Toronto)

Title: Market diversity, excess growth, and portfolio choice

Abstract: Market diversity and excess growth are two important concepts in the mathematical study of stock markets. In this talk, we explore their statistical and mathematical foundations, as well as their implications for portfolio choice. We first study market diversity, a measure of market concentration, using ranked financial data and convex principal component analysis. We then examine the excess growth rate, a fundamental logarithmic functional that captures the benefits of portfolio diversification, and present novel axiomatic characterizations that have an information-theoretic flavor. Finally, we develop a stochastic control framework to investigate how the joint distribution of market diversity and excess growth can inform dynamic allocation between equal-weighted and capitalization-weighted portfolios. This talk is based on joint work with Steven Campbell, Brian Ceco, and Xiaofei Shi.