Joint tails impact in stochastic volatility portfolio selection models
The result's identifiers
Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F61989100%3A27510%2F20%3A10246252" target="_blank" >RIV/61989100:27510/20:10246252 - isvavai.cz</a>
Result on the web
<a href="https://link.springer.com/article/10.1007/s10479-020-03531-w" target="_blank" >https://link.springer.com/article/10.1007/s10479-020-03531-w</a>
DOI - Digital Object Identifier
<a href="http://dx.doi.org/10.1007/s10479-020-03531-w" target="_blank" >10.1007/s10479-020-03531-w</a>
Alternative languages
Result language
angličtina
Original language name
Joint tails impact in stochastic volatility portfolio selection models
Original language description
This paper examines the impact of the joints tails of the portfolio return and its empirical volatility on the optimal portfolio choices. We assume that the portfolio return and its volatility dynamic is approximated by a bivariate Markov chain constructed on its historical distribution. This allows the introduction of a non parametric stochastic volatility portfolio model without the explicit use of a GARCH type or other parametric stochastic volatility models. We describe the bi-dimensional tree structure of the Markov chain and discuss alternative portfolio strategies based on the maximization of the Sharpe ratio and of a modified Sharpe ratio that takes into account the behaviour of a market benchmark. Finally, we empirically evaluate the impact of the portfolio and its stochastic volatility joint tails on optimal portfolio choices. In particular, we examine and compare the out of sample wealth obtained optimizing the portfolio performances conditioned on the joint tails of the proposed stochastic volatility model.
Czech name
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Czech description
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Classification
Type
J<sub>imp</sub> - Article in a specialist periodical, which is included in the Web of Science database
CEP classification
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OECD FORD branch
50206 - Finance
Result continuities
Project
<a href="/en/project/GA19-11965S" target="_blank" >GA19-11965S: A network approach to portfolio optimization and tracking problems</a><br>
Continuities
P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)
Others
Publication year
2020
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
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Volume of the periodical
292
Issue of the periodical within the volume
2
Country of publishing house
NL - THE KINGDOM OF THE NETHERLANDS
Number of pages
16
Pages from-to
833-848
UT code for WoS article
000520047700001
EID of the result in the Scopus database
2-s2.0-85079726831