The optimal portfolio model based on multivariate t distribution with linear weighted sum method

Yu Xing
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Yu Xing: Department of Mathematics and Applied Mathematics Humanities and Science and Technology Institute of Hunan Loudi, 417000, P.R. China

E3 Journal of Business Management and Economics., 2012, vol. 3, issue 1, 044-047

Abstract: This paper proposed the optimal portfolio model maximizing returns and minimizing the risk expressed as CvaR under the assumption that the portfolio yield is subject to the multivariate t distribution. With linear weighted sum method, we solved the multi-objectives model, and compared the model results to the case under the assumption of normal distribution return, based on the portfolio VAR through empirical research. It is showed that our max return equals to and risk is higher than M-V model. It shows that CVaR predicts the potential risk of the portfolio, which is helpful for investor’s cautious investment.

Keywords: Multivariate t distribution; The optimal portfolio; CVAR; Multi- objectives programming; Linear weighted sum method (search for similar items in EconPapers)
Date: 2012-01
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