Mean–variance optimization under affine GARCH: A utility-based solution

Marcos Escobar-Anel, Ben Spies and Rudi Zagst
Authors registered in the RePEc Author Service: Marcos Escobar Anel ()

Finance Research Letters, 2024, vol. 59, issue C

Abstract: Affine GARCH models have recently been explored in the context of portfolio optimization, although in a quite narrow setting in terms of utility functions and risk aversion. This work notably extends existing results, accommodating a richer class of objective functions for a large family of GARCH models. In particular, our approach allows for connections to constant proportion portfolio insurance (CPPI) and mean–variance portfolio strategies. We explore the latter numerically based on S&P 500 market data, revealing that a GARCH model clearly outperforms a homoscedastic variant in terms of the efficient frontier.

Keywords: Dynamic portfolio optimization; Affine GARCH models; Mean–variance; Efficient frontier; HARA utility; CPPI strategy (search for similar items in EconPapers)
JEL-codes: C52 C58 C61 G11 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1544612323011212
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:59:y:2024:i:c:s1544612323011212

DOI: 10.1016/j.frl.2023.104749

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().