FACULTÉ & RECHERCHE

Features, or contextual information, are additional data than can help predicting asset returns in financial problems. We propose a mean-risk portfolio selection problem that uses contextual information to maximize expected returns at each time period, weighing past observations via kernels based on the current state of the world. We consider yearly intervals for investment opportunities, and a set of indices that cover the most relevant investment classes. For those intervals, data scarcity is a problem that is often dealt with by making distribution assumptions. We take a different path and use distribution-free simulation techniques to populate our database. In our experiments we use the Conditional Value-at-Risk as our risk measure, and we work with data from 2007 until 2021 to evaluate our methodology. Our results show that, by incorporating features, the out-of-sample performance of our strategy outperforms the equally-weighted portfolio. We also generate diversified positions, and efficient frontiers that exhibit coherent risk-return patterns.