On the use of conditional expectation in portfolio selection problems

Kód výsledku v 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>

Výsledek na webu

<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>

Jazyk výsledku

angličtina

Název v původním jazyce

On the use of conditional expectation in portfolio selection problems

Popis výsledku v původním jazyce

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

Název v anglickém jazyce

On the use of conditional expectation in portfolio selection problems

Popis výsledku anglicky

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

Druh

J_imp - Článek v periodiku v databázi Web of Science

CEP obor

—

OECD FORD obor

50206 - Finance

Projekt

<a href="/cs/project/GA17-19981S" target="_blank" >GA17-19981S: Finanční aplikace stochastického uspořádání</a><br>

Návaznosti

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

Rok uplatnění

2019

Kód důvěrnosti údajů

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

Název periodika

Annals of Operations Research

ISSN

0254-5330

e-ISSN

—

Svazek periodika

274

Číslo periodika v rámci svazku

1-2

Stát vydavatele periodika

US - Spojené státy americké

Počet stran výsledku

30

Strana od-do

501-530

Kód UT WoS článku

000458483900023

EID výsledku v databázi Scopus

2-s2.0-85047158309