Portfolio optimization using a parsimonious multivariate GARCH model: application to the Brazilian stock market
AbstractWe apply a parsimonious multivariate GARCH speci cation based on the Fama-French-Carhart factor model to generate high-dimensional conditional covariance matrices and to obtain shortselling-constrained and unconstrained minimum variance portfolios. An application involving 61 stocks traded on the S~ao Paulo stock exchange (BM&FBovespa) shows that the proposed speci cation delivers less risky portfolios on an out-of-sample basis in comparison to several benchmark models, including existing factor approaches.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 32 (2012)
Issue (Month): 3 ()
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portfolio optimization; forecasting; performance evaluation; Sharpe ratio;
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- G1 - Financial Economics - - General Financial Markets
- C5 - Mathematical and Quantitative Methods - - Econometric Modeling
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