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Value-at-Risk Efficient Portfolio Selection Using Goal Programming

Author

Listed:
  • Hsin-Hung Chen

    (Department of Business Administration, Cheng Shiu University, No. 840, Chengcing Rd., Niaosong Township, Kaohsiung County 833, Taiwan)

Abstract

The purpose of this study is to apply polynomial goal programming to establish a new portfolio selection model that considers the tradeoffs between expected return and Value-at-Risk (VaR) of portfolios and the flexibility of incorporating investor's preferences. The historical data of 10 international stock markets of Pacific Rim countries were used in the empirical analysis. The results showed that the proposed model demonstrated the ability to resolve the problems of a traditional asset allocation model. The validity and fitness of the proposed model were confirmed.

Suggested Citation

  • Hsin-Hung Chen, 2008. "Value-at-Risk Efficient Portfolio Selection Using Goal Programming," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 11(02), pages 187-200.
    • Handle: RePEc:wsi:rpbfmp:v:11:y:2008:i:02:n:s0219091508001313
    DOI: 10.1142/S0219091508001313
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    Citations

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    Cited by:

    1. Alex Huang, 2013. "Value at risk estimation by quantile regression and kernel estimator," Review of Quantitative Finance and Accounting, Springer, vol. 41(2), pages 225-251, August.
    2. Briec, Walter & Kerstens, Kristiaan & Van de Woestyne, Ignace, 2013. "Portfolio selection with skewness: A comparison of methods and a generalized one fund result," European Journal of Operational Research, Elsevier, vol. 230(2), pages 412-421.
    3. Jiapeng Liu & Rui Lu & Ronghua Yi & Ting Zhang, 2017. "Modelling optimal asset allocation when households experience health shocks," Review of Quantitative Finance and Accounting, Springer, vol. 49(1), pages 245-261, July.
    4. Yam Wing Siu, 2020. "Impact of Expected Shortfall Approach on Capital Requirement Under Basel," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 22(04), pages 1-34, January.
    5. Briec, Walter & Kerstens, Kristiaan & Van de Woestyne, Ignace, 2011. "Portfolio Selection with Skewness: A Comparison and a Generalized Two Fund Separation Result," Working Papers 2011/09, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
    6. Patrick Bielstein & Matthias X. Hanauer, 2019. "Mean-variance optimization using forward-looking return estimates," Review of Quantitative Finance and Accounting, Springer, vol. 52(3), pages 815-840, April.
    7. Constantin Anghelache & Madalina-Gabriela Anghel & Stefan Virgil Iacob, 2020. "The Market Risk Analysis By Quantification Method," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 5, pages 170-180, October.

    More about this item

    Keywords

    Efficient frontier; portfolio selection; polynomial goal programming; Value-at-Risk (VaR);
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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