On the Tail Mean-Variance optimal portfolio selection

Zinoviy Landsman

Insurance: Mathematics and Economics, 2010, vol. 46, issue 3, 547-553

Abstract: In the present paper we propose the Tail Mean-Variance (TMV) approach, based on Tail Condition Expectation (TCE) (or Expected Short Fall) and the recently introduced Tail Variance (TV) as a measure for the optimal portfolio selection. We show that, when the underlying distribution is multivariate normal, the TMV model reduces to a more complicated functional than the quadratic and represents a combination of linear, square root of quadratic and quadratic functionals. We show, however, that under general linear constraints, the solution of the optimization problem still exists and in the case where short selling is possible we provide an analytical closed form solution, which looks more "robust" than the classical MV solution. The results are extended to more general multivariate elliptical distributions of risks.

Keywords: Tail; condition; expectation; Tail; variance; Tail; Mean-Variance; model; Optimal; portfolio; selection; Square; root; of; quadratic; functional; Elliptical; family; Quartic; equation (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:46:y:2010:i:3:p:547-553

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