IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Empirical Comparison of Robust Portfolios’ Investment Effects

Listed author(s):
  • Bartosz Kaszuba
Registered author(s):

    The purpose of this article is to assess whether correct application of robust estimators in construction of minimum variance portfolios' (MVP) allows to achieve better investment results in comparison with portfolios defined using classical MLE estimators. Theoretical robust portfolios properties and portfolios investment effect are compared. This paper proposes a practical methodology of comparing alternative estimation methods, based on random portfolio selection. This approach enables to analyse investment effects of various portfolios. The empirical analysis shows that for MVP portfolios with nonnegative constraints created using robust methods, there is no significant risk improvement, and that even for most robust methods, there is an observable significant risk increase compared to the risk of classical portfolios. This paper also shows that robust portfolio estimators cause higher transaction cost.

    If 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.

    File URL: http://www.rfb.ase.ro/articole/ARTICLE_IV.pdf
    File Function: Full text
    Download Restriction: no

    Article provided by Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante in its journal The Review of Finance and Banking.

    Volume (Year): 05 (2012)
    Issue (Month): 1 (June)
    Pages: 047-061

    as
    in new window

    Handle: RePEc:rfb:journl:v:05:y:2013:i:1:p:047-061
    Contact details of provider: Postal:
    Strada Mihai Eminescu nr.13-15, sector 1, Bucuresti, Romania

    Phone: 0040-01-2112650
    Fax: 0040-01-3129549
    Web page: http://www.fin.ase.ro/
    Email:


    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as
    in new window


    1. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
    2. Ledoit, Olivier & Wolf, Michael, 2003. "Improved estimation of the covariance matrix of stock returns with an application to portfolio selection," Journal of Empirical Finance, Elsevier, vol. 10(5), pages 603-621, December.
    3. Schäfer Juliane & Strimmer Korbinian, 2005. "A Shrinkage Approach to Large-Scale Covariance Matrix Estimation and Implications for Functional Genomics," Statistical Applications in Genetics and Molecular Biology, De Gruyter, vol. 4(1), pages 1-32, November.
    4. Ravi Jagannathan & Tongshu Ma, 2003. "Risk Reduction in Large Portfolios: Why Imposing the Wrong Constraints Helps," Journal of Finance, American Finance Association, vol. 58(4), pages 1651-1684, 08.
    5. Luigi Grossi & Fabrizio Laurini, 2011. "Robust estimation of efficient mean–variance frontiers," Advances in Data Analysis and Classification, Springer;German Classification Society - Gesellschaft für Klassifikation (GfKl);Japanese Classification Society (JCS);Classification and Data Analysis Group of the Italian Statistical Society (CLADAG);International Federation of Classification Societies (IFCS), vol. 5(1), pages 3-22, April.
    6. Beatriz Vaz de Melo Mendes & Ricardo Pereira Camara Leal, 2005. "Robust multivariate modeling in finance," International Journal of Managerial Finance, Emerald Group Publishing, vol. 1(2), pages 95-106, April.
    7. Khan, Jafar A. & Van Aelst, Stefan & Zamar, Ruben H., 2007. "Robust Linear Model Selection Based on Least Angle Regression," Journal of the American Statistical Association, American Statistical Association, vol. 102, pages 1289-1299, December.
    8. Christos Papahristodoulou & Erik Dotzauer, 2005. "Optimal portfolios using linear programming models," Finance 0505006, EconWPA.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:rfb:journl:v:05:y:2013:i:1:p:047-061. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tatu Lucian)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.