Backtesting of portfolio optimization with and without risk-free asset

Kód výsledku v 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>

Výsledek na webu

<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>

Jazyk výsledku

angličtina

Název v původním jazyce

Backtesting of portfolio optimization with and without risk-free asset

Popis výsledku v původním jazyce

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

Název v anglickém jazyce

Backtesting of portfolio optimization with and without risk-free asset

Popis výsledku anglicky

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

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

Ekonomická revue

ISSN

1212-3951

e-ISSN

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Svazek periodika

18

Číslo periodika v rámci svazku

2

Stát vydavatele periodika

CZ - Česká republika

Počet stran výsledku

7

Strana od-do

75-81

Kód UT WoS článku

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EID výsledku v databázi Scopus

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