EconPapers    
Economics at your fingertips  
 

Dynamic copula-based expectile portfolios

Maziar Sahamkhadam ()
Additional contact information
Maziar Sahamkhadam: Linnaeus University

Journal of Asset Management, 2021, vol. 22, issue 3, No 5, 209-223

Abstract: Abstract This study investigates expectile Value-at-Risk (EVaR) as a risk measure in dynamic copula-based portfolio optimization, compared with the common variance and CVaR. To estimate the dependence structure between asset returns, the canonical vine copula augmented with the generalized additive models (GAMC-vine) is used. Applying multivariate conditional distributions from the GAMC-vine model, step-ahead asset return forecasts are obtained and used to construct dynamic copula-based EVaR portfolios. Using ten S&P 500 industry sectors, EVaR leads to a min-risk dynamic GAMC-vine portfolio that achieves higher out-of-sample average return and risk-adjusted ratios. Furthermore, EVaR shows a better portfolio ranking than CVaR. Moreover, the copula-based variance and EVaR portfolios show higher-order stochastic dominance compared to CVaR strategies. Finally, a subsample stochastic dominance analysis reveals that, in overall, the risk minimization does not benefit from the choice of risk modeling. However, the dynamic copula model leads to optimal portfolios that dominate the equally weighted benchmark more often compared to those from historical approach.

Keywords: Expectile value-at-risk; Dynamic vine copula; Generalized additive model; Stochastic dominance (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://link.springer.com/10.1057/s41260-021-00210-8 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:22:y:2021:i:3:d:10.1057_s41260-021-00210-8

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

DOI: 10.1057/s41260-021-00210-8

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 ().

 
Page updated 2022-05-12
Handle: RePEc:pal:assmgt:v:22:y:2021:i:3:d:10.1057_s41260-021-00210-8