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2013 | 42 | nr 4 | 855--871
Tytuł artykułu

Performance of Robust Portfolio Optimization in Crisis Periods

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We examin empirical performances of two alternative robust optimization models, namely the worst-case conditional value-at-risk (worst-case CVaR) model and the nominal conditional value-at-risk (CVaR) model in crisis periods. Both models are based on historical value-at-risk methodology. These performances are compared by using a portfolio constructed on the basis of daily closing values of different stock indices in developed markets using data from 1990 to 2013. An empirical evidence is produced with RobustRisk software application. Both a Monte-Carlo simulation and an out-of-sample test show that robust optimization with worst-case CVaR model outperforms the nominal CVaR model in the crisis periods. However, the trade-off between model misspecification risk and return maximization depending on the market movements should be optimized in a robust model selection. (original abstract)
Opis fizyczny
  • Technical University Davutpasa, Istanbul, Turkey
  • School of Management, Bradford University, UK
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