Robust Portfolio Optimization with Multivariate Copulas : A Worst-Case CVaR Approach
Using data from the S&P 500 stocks from 1990 to 2015, we address the uncertainty of distribution of assets' returns in Conditional Value-at-Risk (CVaR) minimization model by applying multidimensional mixed Archimedean copula function and obtaining its robust counterpart. We implement a dynamic investing viable strategy where the portfolios are optimized using three different length of rolling calibration windows. The out-of-sample performance is evaluated and compared against two benchmarks: a multidimensional Gaussian copula model and a constant mix portfolio. Our empirical analysis shows that the Mixed Copula-CVaR approach generates portfolios with better downside risk statistics for any rebalancing period and it is more profitable than the Gaussian Copula-CVaR and the 1/N portfolios for daily and weekly rebalancing. To cope with the dimensionality problem we select a set of assets that are the most diversified, in some sense, to the S&P 500 index in the constituent set. The accuracy of the VaR forecasts is determined by how well they minimize a capital requirement loss function. In order to mitigate data-snooping problems, we apply a test for superior predictive ability to determine which model significantly minimizes this expected loss function. We find that the minimum average loss of the mixed Copula-CVaR approach is smaller than the average performance of the Gaussian Copula-CVaR
Year of publication: |
2018
|
---|---|
Authors: | B. Sabino da Silva, Fernando |
Other Persons: | Ziegelman, Flávio (contributor) |
Publisher: |
[2018]: [S.l.] : SSRN |
Subject: | Portfolio-Management | Portfolio selection | Multivariate Verteilung | Multivariate distribution | Theorie | Theory | Multivariate Analyse | Multivariate analysis | Robustes Verfahren | Robust statistics | Risikomaß | Risk measure | Mathematische Optimierung | Mathematical programming |
Saved in:
freely available
Extent: | 1 Online-Ressource (20 p) |
---|---|
Type of publication: | Book / Working Paper |
Language: | English |
Notes: | Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments November 22, 2017 erstellt |
Other identifiers: | 10.2139/ssrn.3076283 [DOI] |
Classification: | G11 - Portfolio Choice ; G12 - Asset Pricing ; G17 - Financial Forecasting |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10012931953
Saved in favorites
Similar items by subject
-
Chabi-Yo, Fousseni, (2021)
-
Chabi-Yo, Fousseni, (2019)
-
Optimisation of mixed assets portfolio using copula differential evolution : a behavioural approach
Ababio, Kofi A., (2020)
- More ...
Similar items by person
-
Mixed Copula Pairs Trading Strategy on the S&P 500
B. Sabino da Silva, Fernando, (2019)
- More ...