Backtesting of portfolio optimization with and without risk-free asset

Result code in IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F61989100%3A27510%2F15%3A86094578" target="_blank" >RIV/61989100:27510/15:86094578 - isvavai.cz</a>

Result on the web

<a href="http://www.er-cerei.cz/archive/article?volume=18&issue=2&paper=230" target="_blank" >http://www.er-cerei.cz/archive/article?volume=18&issue=2&paper=230</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.7327/cerei.2015.06.01" target="_blank" >10.7327/cerei.2015.06.01</a>

Result language

angličtina

Original language name

Backtesting of portfolio optimization with and without risk-free asset

Original language description

A classical question in modern portfolio theory asks how the best portfolio composition can be chosen. Answering this question is definitely not easy and the general approach is to maximize the chosen risk-reward ratio. In our paper, however, we utilizethe mean-variance framework introduced by Markowitz and maximize the (quadratic) utility function, which depends on the expected return (future mean return) and its variance. Simplification in terms of the applied utility function instead of the performance ratio allows portfolio backtesting over a relatively long period with a short computation time. The goal of the paper is to analyse how the risk-free asset investment possibility influences the ex post observed wealth path in the case of the selectedperiod and data set. We find that the possibility of risk-free investments actually deteriorates the wealth path. Our explanation is that the simple portfolio optimization strategy proposed in the paper is unable to forecast market decli

Czech name

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Czech description

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Type

J_x - Unclassified - Peer-reviewed scientific article (Jimp, Jsc and Jost)

CEP classification

AE - Management, administration and clerical work

OECD FORD branch

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Project

Result was created during the realization of more than one project. More information in the Projects tab.

Continuities

P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)

Publication year

2015

Confidentiality

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Name of the periodical

Ekonomická revue

ISSN

1212-3951

e-ISSN

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Volume of the periodical

18

Issue of the periodical within the volume

2

Country of publishing house

CZ - CZECH REPUBLIC

Number of pages

7

Pages from-to

75-81

UT code for WoS article

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EID of the result in the Scopus database

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