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An efficient method of evaluating portfolio risk and return

Author

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  • Riccardo Bramante
  • Gimmi Dallago

Abstract

This paper presents an efficient method to compute portfolio risk and return. Two methodologies are exposed in evaluating portfolio performance by aggregation of securities returns: the first one is based on local approximations of the compounding capitalization formula; in the alternative method, which properties are extremely useful within IAS-IFRS accounting principles, integral approximations of the amortized cost function are used. As for risk estimation, total portfolio tracking error is decomposed in summable factors directly related to benchmark asset class and portfolio weights. Copyright Springer-Verlag 2013

Suggested Citation

  • Riccardo Bramante & Gimmi Dallago, 2013. "An efficient method of evaluating portfolio risk and return," Computational Statistics, Springer, vol. 28(3), pages 1351-1363, June.
    • Handle: RePEc:spr:compst:v:28:y:2013:i:3:p:1351-1363
    DOI: 10.1007/s00180-012-0362-9
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    More about this item

    Keywords

    IAS-IFRS; Risk and return; Tracking error; Portfolio selection; C63; G11;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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