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On the Performance of Mean-Risk Portfolio Optimization Strategies
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics.
2018 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

Finding a portfolio strategy that entails optimal performance and risk diversification may be a complicated task for investors. In this thesis, we explore and evaluate the performances of several non-trivial portfolio optimization strategies, based on various measures of risk, to identify the optimal choice. Furthermore, as in contemporary papers, we will also assess whether or not trivial strategies are outperformed by those that rely on rigorous theoretical frameworks.

These portfolio strategies were backtested on historic U.S. stock marketdata ranging from 2000 to 2015, to evaluate how they had performed in reality at the time.

In accordance with similar studies, the performance of a trivial equally weighted strategy was not significantly distinguishable from the non-trivial counterparts analyzed in this paper. However, it required 42% more reallocations,possibly implying higher operational costs. By contrast, a non-trivial Expected Shortfall strategy performed better in general, particularly considering its Sharpe ratio. Based on this and mainly its appealing theoretical properties, it is deemed the best strategy to pursue in portfolio management.

Place, publisher, year, edition, pages
2018.
National Category
Economics
Identifiers
URN: urn:nbn:se:umu:diva-149611OAI: oai:DiVA.org:umu-149611DiVA, id: diva2:1223139
Available from: 2018-06-25 Created: 2018-06-25 Last updated: 2018-06-25Bibliographically approved

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CiteExportLink to record
Permanent link

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Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf