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On the use of conditional expectation in portfolio selection problems

The result's identifiers

  • Result code in IS VaVaI

    <a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F61989100%3A27510%2F19%3A10240127" target="_blank" >RIV/61989100:27510/19:10240127 - isvavai.cz</a>

  • Result on the web

    <a href="https://link.springer.com/article/10.1007%2Fs10479-018-2890-3" target="_blank" >https://link.springer.com/article/10.1007%2Fs10479-018-2890-3</a>

  • DOI - Digital Object Identifier

    <a href="http://dx.doi.org/10.1007/s10479-018-2890-3" target="_blank" >10.1007/s10479-018-2890-3</a>

Alternative languages

  • Result language

    angličtina

  • Original language name

    On the use of conditional expectation in portfolio selection problems

  • Original language description

    In this paper, we examine the use of conditional expectation, either to reduce the dimensionality of large-scale portfolio problems or to propose alternative reward-risk performance measures. In particular, we focus on two financial problems. In the first part, we discuss and examine correlation measures (based on a conditional expectation) used to approximate the returns in large-scale portfolio problems. Then, we compare the impact of alternative return approximation methodologies on the ex-post wealth of a classic portfolio strategy. In this context, we show that correlation measures that use the conditional expectation perform better than the classic measures do. Moreover, the correlation measure typically used for returns in the domain of attraction of a stable law works better than the classic Pearson correlation does. In the second part, we propose new performance measures based on a conditional expectation that take into account the heavy tails of the return distributions. Then, we examine portfolio strategies based on optimizing the proposed performance measures. In particular, we compare the ex-post wealth obtained from applying the portfolio strategies, which use alternative performance measures based on a conditional expectation. In doing so, we propose an alternative use of conditional expectation in various portfolio problems. (C) 2018 Springer Science+Business Media, LLC, part of Springer Nature

  • Czech name

  • Czech description

Classification

  • Type

    J<sub>imp</sub> - Article in a specialist periodical, which is included in the Web of Science database

  • CEP classification

  • OECD FORD branch

    50206 - Finance

Result continuities

  • Project

    <a href="/en/project/GA17-19981S" target="_blank" >GA17-19981S: Financial applications of stochastic ordering rules</a><br>

  • Continuities

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

Others

  • Publication year

    2019

  • Confidentiality

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

Data specific for result type

  • Name of the periodical

    Annals of Operations Research

  • ISSN

    0254-5330

  • e-ISSN

  • Volume of the periodical

    274

  • Issue of the periodical within the volume

    1-2

  • Country of publishing house

    US - UNITED STATES

  • Number of pages

    30

  • Pages from-to

    501-530

  • UT code for WoS article

    000458483900023

  • EID of the result in the Scopus database

    2-s2.0-85047158309