Application of GARCH-Copula Model in Portfolio Optimization

Kód výsledku v IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F61989100%3A27510%2F15%3A86094574" target="_blank" >RIV/61989100:27510/15:86094574 - isvavai.cz</a>

Výsledek na webu

<a href="http://fai.econ.muni.cz/2015/2/63" target="_blank" >http://fai.econ.muni.cz/2015/2/63</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.5817/FAI2015-2-1" target="_blank" >10.5817/FAI2015-2-1</a>

Jazyk výsledku

angličtina

Název v původním jazyce

Application of GARCH-Copula Model in Portfolio Optimization

Popis výsledku v původním jazyce

Although the cornerstone of modern portfolio theory was set by Markowitz in 1952, the portfolio optimization problem is a never-ending research topic for both academics and practitioners. In this problem the future prediction of time series evolution plays an important role. However, it is rarely addressed in research. In the paper we analyze the applicability of the GARCH-copula model. To be more concrete we assume the investor maximizing Sharpe ratio while the future evolution of the time series is simulated by means of the AR(1)-GARCH(1,1) model using the copula modelling approach. The bootstrapping technique is applied as a benchmark. From the empirical results we found out that the GARCH-copula model provides better forecasts of future financial time series evolution than the bootstrapping method. Assuming the investor is maximizing the Sharpe ratio, both the final wealth increases and maximum drawdown decreases when we apply the GARCH-copula model compared to the application of b

Název v anglickém jazyce

Application of GARCH-Copula Model in Portfolio Optimization

Popis výsledku anglicky

Although the cornerstone of modern portfolio theory was set by Markowitz in 1952, the portfolio optimization problem is a never-ending research topic for both academics and practitioners. In this problem the future prediction of time series evolution plays an important role. However, it is rarely addressed in research. In the paper we analyze the applicability of the GARCH-copula model. To be more concrete we assume the investor maximizing Sharpe ratio while the future evolution of the time series is simulated by means of the AR(1)-GARCH(1,1) model using the copula modelling approach. The bootstrapping technique is applied as a benchmark. From the empirical results we found out that the GARCH-copula model provides better forecasts of future financial time series evolution than the bootstrapping method. Assuming the investor is maximizing the Sharpe ratio, both the final wealth increases and maximum drawdown decreases when we apply the GARCH-copula model compared to the application of b

Druh

J_x - Nezařazeno - Článek v odborném periodiku (Jimp, Jsc a Jost)

CEP obor

AE - Řízení, správa a administrativa

OECD FORD obor

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Projekt

Výsledek vznikl pri realizaci vícero projektů. Více informací v záložce Projekty.

Návaznosti

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

Rok uplatnění

2015

Kód důvěrnosti údajů

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

Název periodika

Financial Assets and Investing

ISSN

1804-5081

e-ISSN

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Svazek periodika

6

Číslo periodika v rámci svazku

2

Stát vydavatele periodika

CZ - Česká republika

Počet stran výsledku

14

Strana od-do

7-20

Kód UT WoS článku

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EID výsledku v databázi Scopus

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