We show that internationally diversified portfolios carry sizeable political risk premia. We use a tail-risk portfolio selection model to obtain political efficient frontiers from skewed return distributions and manage political risk, and design an inference test to draw conclusions. We find...

Passive investment strategies basically aim to replicate an underlying benchmark. Thereby, the management usually selects a subset of stocks being employed in the optimization procedure. Apart from the optimization procedure, the stock selection approach determines the stock portfolios's...

This paper investigates the link between economic state and investment levels in an economy within the premise of a partial equilibrium econometric setup based on the central philosophies of production-based asset pricing model and economic tracking portfolio models. By employing a simple linear...

We introduce the selection of financial portfolios in a nonstationary Gaussian framework that assumes the price process to be modeled by a multifractional Brownian motion (mBm). This process captures the time-changing regularity of the sample paths as a result of the impact of the new...

We reinvestigate the classic portfolio optimization problem where the notion of portfolio risk is captured by the “Foster-Hart risk” — a new, bankruptcy-proof, reserve based measure of risk, extremely sensitive to left tail events (Foster and Hart, 2009). To include financial market...

We forecast portfolio risk for managing dynamic tail risk protection strategies, based on extreme value theory, expectile regression, Copula-GARCH and dynamic GAS models. Utilizing a loss function that overcomes the lack of elicitability for Expected Shortfall, we propose a novel Expected...

This paper illustrates how qualitative analysis can be incorporated into quantitative risk measurement in order to construct an expected distribution of hedge fund returns that explicitly allows for market, residual and tail risk. We show how the combination of statistical criteria with...

Even though correlations between different economies' stock markets have empirically increased over time, it would have been advantageously to invest in developing countries' stock markets such as the Indian stock market, instead of investing in the US-stock market when considering the overall...

We investigate simply the usage of clustering method by inverse covariance estimation for asset allocation in finance. Allocation across various sectors of the market (i.e. sector ETF) is usually well understood through the usage of mean variance allocation. However, stocks inside a same sector...