Portfolio selection in the presence of systemic risk

Almira Biglova, Sergio Ortobelli and Frank J Fabozzi ()
Additional contact information
Frank J Fabozzi: EDHEC Business School and EDHEC Risk Institute

Journal of Asset Management, 2014, vol. 15, issue 5, No 2, 285-299

Abstract: Abstract In this article we study the portfolio selection problem in the presence of systemic risk. We propose reward-risk measures that account for systemic risk and provide a methodology to generate realistic return scenarios. The methodology involves first analyzing the empirical behavior of several MSCI country indexes, suggesting how to approximate future scenarios. Then we examine the profitability of several strategies based on the forecasted evolution of returns. In particular, we compare the optimal sample paths of future wealth obtained by performing reward-risk portfolio optimization on simulated data and we discuss the ex-post performance of the proposed portfolio strategies.

Keywords: systemic risk; portfolio selection; performance measure; scenario generation; heavy tails; skewness (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
http://link.springer.com/10.1057/jam.2014.30 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:assmgt:v:15:y:2014:i:5:d:10.1057_jam.2014.30

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/41260

DOI: 10.1057/jam.2014.30

Access Statistics for this article

Journal of Asset Management is currently edited by Marielle de Jong and Dan diBartolomeo

More articles in Journal of Asset Management from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().