 Dynamic robust portfolio selection under market distressYifu Jiang, Jose Olmo and Majed Atwi The North American Journal of Economics and Finance, 2024, vol. 69, issue PB Abstract: This article proposes a dynamic robust portfolio selection model that is based on minimizing portfolio’s worst case scenarios using the Conditional Value at Risk as relevant risk measure. Our proposed empirical model for the dynamics of portfolio constituents has three main features: i) accommodates tail dependence between assets by means of a mixture of copula functions; ii) conditional heteroscedasticity and leverage effects are considered through the implementation of a GJR-GARCH model; and iii) extreme events are taken into account by considering parametric and semiparametric hybrid models for the marginal distribution of asset returns. We illustrate the performance of this portfolio before and during the COVID-19 pandemic using statistical measures such as the Sharpe ratio, cumulative returns, and volatility. The results show the outperformance of our WCVaR portfolio during the turmoil period against benchmark portfolios commonly used by practitioners. The method also exhibits good performance during calm periods. Keywords: Robust portfolio selection; Dynamic multivariate copula; GJR-GARCH-EVT; Conditional value-at-risk; Financial crisis (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:69:y:2024:i:pb:s1062940823001602 DOI: 10.1016/j.najef.2023.102037 Access Statistics for this article The North American Journal of Economics and Finance is currently edited by Hamid Beladi More articles in The North American Journal of Economics and Finance from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.