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Mean-Variance & Mean-VaR Portfolio Selection: A Simulation Based Comparison in the Czech Crisis Environment

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Abstract

This paper focuses on two methods for optimum portfolio selection. We compare Mean-Variance method with Mean-VaR method by the means of investment simulation, based on Czech financial market data from turbulent market periods of the year 2007 and the year 2008. We compare both strategies, basing on measurements of relative and absolute profitability of both strategies in crisis periods. The results indicate that both strategies were relatively profitable in both simulation periods. As a consequence of our results, it seems that it is worth to adhering investment decisions to outputs of optimisation algorithms of both methods. Moreover, we consider Mean-VaR strategy to be safer in turbulent times.

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File URL: http://ies.fsv.cuni.cz/default/file/download/id/14704
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Bibliographic Info

Paper provided by Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies in its series Working Papers IES with number 2010/27.

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Length: 21pages
Date of creation: Nov 2010
Date of revision: Nov 2010
Handle: RePEc:fau:wpaper:wp2010_27

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Keywords: portfolio optimization; investment strategy; Mean-Variance; Mean-Var;

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