Economics at your fingertips  

The Impact of Financial Crises on the Asset Allocation: Classical Theory Versus Behavioral Theory

Amen Aissi Harzallah and Mouna Boujelbene Abbes

Journal of Interdisciplinary Economics, 2020, vol. 32, issue 2, 218-236

Abstract: The aim of this article is to compare the portfolio optimization generated by the behavioral portfolio theory (BPT) and the mean variance theory (MVT) by investigating the impact of the global financial crisis on the asset allocation. We use data from the Canadian Stock Exchange over the 2002–2015 period. By comparing both approaches, we show that for any level of aspiration and admissible failure, the BPT optimal portfolio will always contain a part of the mean–variance frontier. Thus, in the case of higher degree of risk aversion induced by typical BPT investors, the security set is located on the upper right of the Markowitz frontier. However, even if the optimal portfolios of MVT and BPT may coincide, MVT investors associated with an extremely low degree of risk aversion will not systematically choose BPT optimal portfolios. Our results also indicate the period of financial crisis generate huge losses in MVT portfolio values that implies a lower expected return and a higher level of risk. Furthermore, we point out the absence of the BPT optimal portfolio when potential losses are higher during the 2008 global financial crisis. JEL: G11, G17, G40

Keywords: Behavioral portfolio theory; mean variance theory; portfolio optimization; financial crisis; investment decisions (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (text/html)

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:

DOI: 10.1177/0260107919848629

Access Statistics for this article

More articles in Journal of Interdisciplinary Economics
Bibliographic data for series maintained by SAGE Publications ().

Page updated 2020-09-19
Handle: RePEc:sae:jinter:v:32:y:2020:i:2:p:218-236