Mean-Variance & Mean-VaR Portfolio Selection: A Simulation Based Comparison in the Czech Crisis Environment
AbstractThis 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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Bibliographic InfoPaper provided by Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies in its series Working Papers IES with number 2010/27.
Date of creation: Nov 2010
Date of revision: Nov 2010
portfolio optimization; investment strategy; Mean-Variance; Mean-Var;
Find related papers by JEL classification:
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- G01 - Financial Economics - - General - - - Financial Crises
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-11-13 (All new papers)
- NEP-CMP-2010-11-13 (Computational Economics)
- NEP-RMG-2010-11-13 (Risk Management)
- NEP-TRA-2010-11-13 (Transition Economics)
You can help add them by filling out this form.
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