Portfolio optimization for heavy-tailed assets: Extreme Risk Index vs. Markowitz

@article{Mainik2015PortfolioOF,
  title={Portfolio optimization for heavy-tailed assets: Extreme Risk Index vs. Markowitz},
  author={Georg Mainik and Georgi K. Mitov and Ludger Ruschendorf},
  journal={Journal of Empirical Finance},
  year={2015},
  volume={32},
  pages={115-134}
}
  • Georg Mainik, Georgi K. Mitov, Ludger Ruschendorf
  • Published 2015
  • Economics
  • Journal of Empirical Finance
  • Using daily returns of the S&P 500 stocks from 2001 to 2011, we perform a backtesting study of the portfolio optimization strategy based on the Extreme Risk Index (ERI). This method uses multivariate extreme value theory to minimize the probability of large portfolio losses. With more than 400 stocks to choose from, our study seems to be the first application of extreme value techniques in portfolio management on a large scale. The primary aim of our investigation is the potential of ERI in… CONTINUE READING
    17 Citations
    Un-Diversifying During Crises: Is It a Good Idea?
    • 1
    • PDF
    Forward-looking portfolio selection with multivariate non-Gaussian models
    • 7
    • PDF
    Un-diversifying during crises: Is it a good idea?
    • 3
    • PDF
    Application of Covariance Matrix Adaptation-Evolution Strategy to Optimal Portfolio
    • 2

    References

    SHOWING 1-10 OF 51 REFERENCES
    Portfolio Selection: An Extreme Value Approach
    • 21
    • PDF
    Optimal Versus Naive Diversification: How Inefficient is the 1/N Portfolio Strategy?
    • 2,066
    • PDF
    International Portfolio Diversification with Estimation Risk
    • 638
    Downside Loss Aversion and Portfolio Management
    • 105
    • PDF
    On optimal portfolio diversification with respect to extreme risks
    • 47
    • PDF
    Diversification in heavy-tailed portfolios: properties and pitfalls
    • 31
    • PDF
    Portfolio optimization for Student t and skewed t returns
    • Quantitative Trader Bell
    • 2007
    • 18
    • PDF
    Portfolio Selection with Robust Estimation
    • 224
    • Highly Influential
    • PDF
    Portfolio optimization when risk factors are conditionally varying and heavy tailed
    • 26
    • PDF