Hedge fund portfolio selection with modified expected shortfall
AbstractModified Value-at-Risk (VaR) and Expected Shortfall (ES) are recently introduced downside risk estimators based on the Cornish-Fisher expansion for assets such as hedge funds whose returns are non-normally distributed. Modified VaR has been widely implemented as a portfolio selection criterion. We are the first to investigate hedge fund portfolio selection using modified ES as optimality criterion. We show that for the EDHEC hedge fund style indices, the optimal portfolios based on modified ES outperform out-of-sample the EDHEC Fund of Funds index and have better risk characteristics than the equal-weighted and Fund of Funds portfolios.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 7126.
Date of creation: 04 Feb 2008
Date of revision:
portfolio optimization; modified expected shortfall; non-normal returns;
Find related papers by JEL classification:
- C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-02-16 (All new papers)
- NEP-FMK-2008-02-16 (Financial Markets)
- NEP-RMG-2008-02-16 (Risk Management)
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.