Beyond Co-Movement: Locality by Exposures Enables a Joint Factor-Graph Framework for Portfolio Diversification
Current portfolio construction methods are either agnostic to the effects of idiosyncratic shocks (standard factor models) or to the latent data structure driving systematic returns (recent graph-based approaches). This presents an opportunity to combine the complementary market aspects captured by the factor and graph domains, allowing asset allocations to operate directly on the underlying market structure, rather than on its observed co-movement or its finite-sample artefacts. In this work, we introduce the Mutually-INformed Graph-Locality and Exposures framework (MINGLE), which mutually regularises the factor and graph domains by redefining graph locality through systematic factor exp...
| Authors | Sara Chehab, Giorgos Iacovides, Parisa Yazdanparast et al. |
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| Primary category | q-fin.PM |
| Published | 6 August 2026 |
| Last updated at source | 6 August 2026 |
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