Robust equity portfolio performance

Jang Ho Kim (), Woo Chang Kim (), Do-Gyun Kwon () and Frank Fabozzi ()
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Jang Ho Kim: Kyung Hee University
Woo Chang Kim: Korea Advanced Institute of Science and Technology (KAIST)
Do-Gyun Kwon: Korea Advanced Institute of Science and Technology (KAIST)

Annals of Operations Research, 2018, vol. 266, issue 1, No 12, 293-312

Abstract: Abstract The earliest documented analytical approach to portfolio selection is Markowitz’s mean–variance analysis, which attempts to find the portfolio with optimal performance by considering the tradeoff between return and risk. The performance of mean–variance analysis has been the subject of many studies and compared to other portfolio construction approaches such as a naïve equally-weighted allocation scheme. In recent years, several approaches have been proposed to improve the mean–variance model by reducing the sensitivity of the portfolio selection process in order achieve robust performance. Although robust portfolio optimization has been one of the most researched methods for improving portfolio robustness, the performance of robust portfolios has not been the major focus of studies. In this paper, a comprehensive analysis on robust portfolio performance is presented for equity portfolios constructed in the U.S. market during the period 1980 and 2014, and results confirm the advantage of robust portfolio optimization for controlling uncertainty while efficiently allocating investments.

Keywords: Portfolio optimization; Robust optimization; Portfolio performance; U.S. equity market (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (10)

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DOI: 10.1007/s10479-017-2739-1

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