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Alternative to the Mean-Variance Asset Allocation Analysis: A Scenario Methodology for Portfolio Selection
Schyns, Michael; Hübner, Georges; Crama, Yves
2009In Gregoriou, Greg N. (Ed.) Stock Market Volatility
 

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Abstract :
[en] This paper introduces a new methodology to optimize the allocation of financial assets. The objective of the model is to maximize the expected return of the portfolio under constraints limiting its Value-at-Risk. The assets could consist in stocks as well as options. We rely on a flexible scenario tree approach to represent the future prices. In order to reduce the number of leaves and maintain the model tractable, stocks prices are obtained through the Fama & French empirical asset pricing model. Experiments on historical data are performed to illustrate the method and show the performance of the approach. Different strategies are compared: considering various market distributions, several factor models and a few portfolio hypothesis.
Research center :
QuantOM
Disciplines :
Finance
Author, co-author :
Schyns, Michael ;  Université de Liège - ULiège > HEC - École de gestion de l'ULiège > Informatique de gestion
Hübner, Georges  ;  Université de Liège - ULiège > HEC - École de gestion de l'ULiège > Gestion financière
Crama, Yves  ;  Université de Liège - ULiège > HEC - École de gestion de l'ULiège > Recherche opérationnelle et gestion de la production
Language :
English
Title :
Alternative to the Mean-Variance Asset Allocation Analysis: A Scenario Methodology for Portfolio Selection
Publication date :
08 April 2009
Main work title :
Stock Market Volatility
Editor :
Gregoriou, Greg N.
Publisher :
Taylor & Francis Group, Boca Raton, United States
ISBN/EAN :
978-1-4200-9954-6
Collection name :
Chapman & Hall / CRC Finance
Pages :
231-254
Available on ORBi :
since 23 April 2009

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