Instruct: Identify the main and secondary category of Arxiv papers based on the titles and abstracts
Query: Hedging and Leveraging: Principal Portfolios of the Capital Asset
  Pricing Model   The principal portfolios of the standard Capital Asset Pricing Model (CAPM)
are analyzed and found to have remarkable hedging and leveraging properties.
Principal portfolios implement a recasting of any correlated asset set of N
risky securities into an equivalent but uncorrelated set when short sales are
allowed. While a determination of principal portfolios in general requires a
detailed knowledge of the covariance matrix for the asset set, the rather
simple structure of CAPM permits an accurate solution for any reasonably large
asset set that reveals interesting universal properties. Thus for an asset set
of size N, we find a market-aligned portfolio, corresponding to the market
portfolio of CAPM, as well as N-1 market-orthogonal portfolios which are market
neutral and strongly leveraged. These results provide new insight into the
return-volatility structure of CAPM, and demonstrate the effect of unbridled
leveraging on volatility.

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The categories of this paper are: plasm-ph
6
The categories of this paper are: astro-ph
27
The categories of this paper are: comp-gas
3
The categories of this paper are: physics
23
The categories of this paper are: solv-int
9
The categories of this paper are: nlin
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The categories of this paper are: patt-sol
14
The categories of this paper are: math-ph
36
The categories of this paper are: cmp-lg
10
The categories of this paper are: q-bio
7
The categories of this paper are: hep-th
5
The categories of this paper are: gr-qc
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The categories of this paper are: hep-ex
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The categories of this paper are: chao-dyn
2
The categories of this paper are: math
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The categories of this paper are: nucl-ex