Application of ARMA-GARCH Returns Generation in Portfolio Selection Process

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F61989100%3A27510%2F22%3A10250227" target="_blank" >RIV/61989100:27510/22:10250227 - isvavai.cz</a>
Result on the web
<a href="https://mme2022.vspj.cz/download/proceedings-2.pdf" target="_blank" >https://mme2022.vspj.cz/download/proceedings-2.pdf</a>
DOI - Digital Object Identifier
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Result language
angličtina
Original language name
Application of ARMA-GARCH Returns Generation in Portfolio Selection Process
Original language description
In this paper, we examine the application of a return scenario generation procedure in the portfolio optimization strategy based on an ARMA-GARCH model. We assume that residuals follow a stable distribution and the dependency structure of residuals is determined by Student t and skewed t copula. Moreover, we analyse the modification in dependency estimation of residuals obtained from the ARMA-GARCH model in order to find an appropriate setting. Then, we compare the effect of selected return approximation methods on the ex-post portfolio wealth and statistics determined using a portfolio model maximizing selected widely used reward-risk measures. Additionally, the strategy consists of monthly re-optimization and transaction costs expressed proportionally. The following empirical analysis on the U.S. market data allows us to evaluate the impact of return approximation in the portfolio optimization process. Results obtained using analysed approaches generate lower risk with affecting portfolio performance for certain models compared to the benchmark.
Czech name
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Czech description
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Project
<a href="/en/project/GA20-16764S" target="_blank" >GA20-16764S: A generalized approach to stochastic dominance: theory and financial applications</a><br>
Continuities
P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)

Publication year
2022
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Article name in the collection
40th International Conference Mathematical Methods in Economics 2022 : Proceedings : College of Polytechnics Jihlava : 7 – 9 September 2022, Jihlava, Czech Republic
ISBN
978-80-88064-62-6
ISSN
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e-ISSN
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Number of pages
6
Pages from-to
250-256
Publisher name
College of Polytechnics Jihlava
Place of publication
Jihlava
Event location
Jihlava
Event date
Oct 7, 2022
Type of event by nationality
EUR - Evropská akce
UT code for WoS article
000936355000039

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