2001-09-01
Optimal portfolio selection in a Value-at-Risk framework
Publication
Publication
Journal of Banking & Finance , Volume 25 - Issue 9 p. 1789- 1804
In this paper, we develop a portfolio selection model which allocates financial assets by maximising expected return subject to the constraint that the expected maximum loss should meet the Value-at-Risk limits set by the risk manager. Similar to the mean-variance approach a performance index like the Sharpe index is constructed. Furthermore when expected returns are assumed to be normally distributed we show that the model provides almost identical results to the mean-variance approach. We provide an empirical analysis using two risky assets: US stocks and bonds. The results highlight the influence of both non-normal characteristics of the expected return distribution and the length of investment time horizon on the optimal portfolio selection.
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doi.org/10.1016/S0378-4266(00)00160-6, hdl.handle.net/1765/70249 | |
Journal of Banking & Finance | |
Organisation | Erasmus Research Institute of Management |
Campbell-Pownall, R., Huisman, R., & Koedijk, K. (2001). Optimal portfolio selection in a Value-at-Risk framework. Journal of Banking & Finance, 25(9), 1789–1804. doi:10.1016/S0378-4266(00)00160-6 |