A simulation comparison of risk measures for portfolio optimization
Marcelo Brutti Righi and
Finance Research Letters, 2018, vol. 24, issue C, 105-112
In this paper, we compare risk measures regarding performance of optimal portfolio strategies. We consider eleven risk measures from different classes. In particular, we propose a formulation that generates from any loss measure, a deviation based on the dispersion of results worse than it, which leads to very interesting risk measures. We consider 198,000 portfolios composed by stocks of the U.S. equity market, considering different scenarios in a simulation framework. Results indicate there is no clearly dominant risk measure. Despite this lack of dominance, including deviation terms consistently exhibits advantages regarding performance.
Keywords: Risk measures; Loss-deviation; Portfolio selection; Simulation (search for similar items in EconPapers)
JEL-codes: C60 G10 G11 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:24:y:2018:i:c:p:105-112
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