Stochastic portfolio theory is a mathematical methodology for constructing stock portfolios, analyzing the behavior of portfolios, and understanding the structure of equity markets. Stochastic portfolio theory has both theoretical and practical applications: as a theoretical tool it can be used to construct examples of theoretical portfolios with specified characteristics, and to determine the distributional component of portfolio return. On a practical level, stochastic portfolio theory has been the basis for strategies used for over a decade by the institutional equity manager INTECH, where...

Stochastic portfolio theory is a mathematical methodology for constructing stock portfolios, analyzing the behavior of portfolios, and understanding the structure of equity markets. Stochastic portfolio theory has both theoretical and practical applications: as a theoretical tool it can be used to construct examples of theoretical portfolios with specified characteristics, and to determine the distributional component of portfolio return. On a practical level, stochastic portfolio theory has been the basis for strategies used for over a decade by the institutional equity manager INTECH, where...