An analysis of mean-variance portfolio selection with varying holding periods

Aydın Ulucan

Applied Economics, 2007, vol. 39, issue 11, 1399-1407

Abstract: In this study, I investigate optimal holding period (investment horizon) for the classical mean-variance portfolio optimization problem. Optimal holding period ex-post is determined using Istanbul Stock Exchange ISE-100 index stocks and Athens Stock Exchange FTSE-40 index stocks data. I extend the approach to other downside risk criteria including expected loss and semi-variance. The analysis involves solving the portfolio optimization problem for a total of 648 cases - two stock exchanges, three different target return levels, three different risk measures and 36 different time periods with rolling data. I discuss the results from the view point of two neighbouring markets: one with an upward trend and the other with a downward trend. The results show that portfolio returns with varying holding periods have a convex structure with an optimal holding period.

Date: 2007
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DOI: 10.1080/00036840600606310

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