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Robust portfolio planning in the presence of market anomalies

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  • Og[caron]uzsoy, Cemal Berk
  • Güven, Sibel

Abstract

In this study, a short-term portfolio modeling formulation is developed using existing anomalies as a single determinant for daily Istanbul Stock Exchange National 100 Composite Index (ISE) and US dollars (USD) returns in a Robust optimization (RO) framework. Using anomalies in planning within an RO framework establishes a balance between risk seeking and risk averse behaviors, as generating profit from anomalies is risky and RO enables to settle down the extreme risk seeking behavior. Applications of the model using various data sets result in real profit generation such that terminal wealth figures increase considerably more than Wholesale Price Index (WPI). This study demonstrates that RO is a viable approach to make use of anomaly information for short-term profits.

Suggested Citation

  • Og[caron]uzsoy, Cemal Berk & Güven, Sibel, 2007. "Robust portfolio planning in the presence of market anomalies," Omega, Elsevier, vol. 35(1), pages 1-6, February.
    • Handle: RePEc:eee:jomega:v:35:y:2007:i:1:p:1-6
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    References listed on IDEAS

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    Cited by:

    1. Panos Xidonas & Ralph Steuer & Christis Hassapis, 2020. "Robust portfolio optimization: a categorized bibliographic review," Annals of Operations Research, Springer, vol. 292(1), pages 533-552, September.
    2. Nalan Gülpınar & Dessislava Pachamanova & Ethem Çanakoğlu, 2016. "A robust asset–liability management framework for investment products with guarantees," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 38(4), pages 1007-1041, October.
    3. Yan, Shangyao & Tang, Ching-Hui, 2009. "Inter-city bus scheduling under variable market share and uncertain market demands," Omega, Elsevier, vol. 37(1), pages 178-192, February.

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