Cover's universal portfolio, stochastic portfolio theory, and the numéraire portfolio
Cover's universal portfolio, stochastic portfolio theory, and the numéraire portfolio
Cover's celebrated theorem states that the long-run yield of a properly chosen "universal" portfolio is almost as good as that of the best retrospectively chosen constant rebalanced portfolio. The "universality" refers to the fact that this result is model-free, that is, not dependent on an underlying stochastic process. We extend …