I am a tenure-track Assistant Professor of Finance at the New Economic School (NES). I received my PhD from the Vienna Graduate School of Finance (VGSF) and the Institute of Statistics and Operations Research (ISOR) at the University of Vienna.

My research interests lie in portfolio optimization, financial econometrics, quantitative risk management, and behavioral finance. My work focuses on large-scale portfolio optimization under practical investment constraints, estimation and inference for systemic risk measures, and the implications of correlation neglect for portfolio diversification. I develop quantitative methods to improve portfolio construction and risk assessment, with the aim of helping investors make better-informed investment decisions and policymakers assess systemic risk while accounting for estimation uncertainty.

E-Mail: ychen@nes.ru or chenyuan9661@gmail.com

CV: Yuan Chen

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Is Correlation Neglect Bad for Portfolio Diversification?

While correlations play a central role in Markowitz portfolio selection, evidence shows that investors often neglect them, relying on simple heuristics rather than Pearson correlation. Standard theory suggests that incorporating correlations should improve performance, yet out-of-sample results frequently favor strategies that ignore them. This paper asks: Is correlation neglect always harmful, and which aspects of correlation truly matter? I propose a transformation that isolates the directional component of correlations and show that both fully ignoring and fully relying on correlation are suboptimal. Empirically, the directional component captures the most relevant information for diversification and improves portfolio performance. By distinguishing between the beneficial and irrelevant components of correlation coefficients, the paper provides a framework for constructing more robust portfolios.

Working Papers

Multivariate Inference for Dynamic Systemic Risk Measures. (with Nikolaus Hautsch, Melanie Schienle, and Jérémy Leymarie ), presented at SOFIE 2025 (Paris), QFFE 2025 (Marseille), Journal of Econometrics (2026)

Cardinality-Constrained Optimization for Large-Scale Portfolio (with Immanuel Bomze, Nikolaus Hautsch, and Bo Peng), presented at EURO 2025 (Leeds), EUROPT 2025 (Southampton)

Apps Based on My Research

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