Integrated stock–bond portfolio management

Xiaochuan Pang, Shuping Wu and Shushang Zhu

Journal of Investment Strategies

Abstract: This paper proposes a stock–bond portfolio selection model that naturally integrates market risk and credit risk via the principles of CreditMetrics. Conditional value-at-risk is adopted as the risk measure for portfolio selection since bond returns are usually skewed. Both simulations and backtestings show that conditional value-at-risk is an appropriate risk measure for stock–bond portfolio selection and that by providing more flexible and stable investment opportunities the integrated portfolio outperforms the portfolios that consider stocks and/or bonds separately.

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Persistent link: https://EconPapers.repec.org/RePEc:rsk:journ6:7958178

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