A simulation comparison of risk measures for portfolio optimization

Marcelo Righi () and Denis Borenstein

Finance Research Letters, 2018, vol. 24, issue C, 105-112

Abstract: 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)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:24:y:2018:i:c:p:105-112

DOI: 10.1016/j.frl.2017.07.013

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