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Bertrand, Philippe; Protopopescu Costin, Protopopescu - 2015

In a recent paper, Lo (2002) derives the asymptotic distribution of the Sharpe ratio under several sets of assumptions for the return-generating process. In this paper, we extend his work to the information ratio (IR), the ratio of the excess return of a portfolio over his benchmark to its...

Persistent link: https://www.econbiz.de/10014133044

Estimating Optimal Hedge Ratio and Hedge Effectiveness via Fitting the Multivariate Skewed Distributions

Liu, Wei-Han - 2011

This paper introduces the use of three multivariate skew distributions (Generalized Hyperbolic distribution, multivariate skew normal distribution, and multivariate skew t distribution) for estimating the minimum variance hedge ratio in a dynamic setting. Three criteria for measuring hedge...

Persistent link: https://www.econbiz.de/10013117483

Dynamic Correlation or Tail Dependence Hedging for Portfolio Selection

Stefanova, Denitsa - 2011

We solve for the optimal portfolio allocation in a setting where both conditional correlation and the clustering of extreme events are considered. We demonstrate that there is a substantial welfare loss in disregarding tail dependence, even when dynamic conditional correlation has been accounted...

Persistent link: https://www.econbiz.de/10013128428

Estimating Optimal Hedge Ratio and Hedge Effectiveness Via Fitting the Multivariate Skewed Distributions

Liu, Wei-Han - 2012

This paper presents the use of three multivariate skew distributions (Generalized Hyperbolic distribution, multivariate skew normal distribution, and multivariate skew t distribution) for estimating minimum variance hedge ratio in a dynamic setting. Three criteria for measuring hedge...

Persistent link: https://www.econbiz.de/10013114075

Portfolio Optimization Under Generalized Hyperbolic Skewed t Distribution and Exponential Utility

Birge, John R. - 2014

In this paper, we show that if asset returns follow a generalized hyperbolic skewed t distribution, the investor has exponential utility function and a riskless asset is available, the optimal portfolio weights can be found either in closed-form or using a successive approximation scheme. We...

Persistent link: https://www.econbiz.de/10013071137

A Black-Litterman Asset Allocation Model Under Elliptical Distributions

Xiao, Yugu - 2010

In optimal portfolio allocation, Black and Litterman (1992) provide for a pioneering framework of allowing to incorporate investors' views based on a prior distribution to derive a posterior distribution of portfolio returns and optimal asset allocations. Meucci (2005) rephrases the model in...

Persistent link: https://www.econbiz.de/10013138944

Investments as Probability Distributions

Jacobsen, Brian - 2010

The core of the theory behind portfolio construction was developed in 1956 by Harry Markowitz. Many pages have been … theory. I cannot recommend enough the insights provided in Modern Portfolio Theory and Investment Analysis, 8/e, by Edwin … the original integrity behind Markowitz's insights and addresses many of the criticisms of the theory …

Persistent link: https://www.econbiz.de/10013147812

Location-Scale Portfolio Selection with Factor-Recentered Skew Normal Asset Returns

Gan, Quan - 2014

This paper analyzes the single period portfolio selection problem on the location-scale return family. The skew normal distribution, after recentering and reparameterization, is shown to be in this family. The recentered and reparameterized distribution, called factor-recentered skew normal, can...

Persistent link: https://www.econbiz.de/10013054884

Monte Carlo Portfolio Optimization for General Investor Risk-Return Objectives and Arbitrary Return Distributions : A Solution for Long-Only Portfolios

Shaw, William Thornton - 2010

We develop the idea of using Monte Carlo sampling of random portfolios to solve portfolio investment problems. In this first paper we explore the need for more general optimization tools, and consider the means by which constrained random portfolios may be generated. A practical scheme for the...

Persistent link: https://www.econbiz.de/10013137970

Distributionally Robust Portfolio Optimization under Marginal and Copula Ambiguity

Fan, Zhengyang; Ji, Ran; Lejeune, Miguel - 2022

We investigate a new family of distributionally robust optimization problem under marginal and copula ambiguity with applications to portfolio optimization problems. The proposed model considers the ambiguity set of portfolio return in which the marginal distributions and their copula are close...

Persistent link: https://www.econbiz.de/10014256348