A Portfolio Selection Analysis with Non-Gaussian Models

Michele Leonardo Bianchi, Stoyan V Stoyanov, Gian Luca Tassinari, Frank Fabozzi () and Sergio M Focardi

Chapter 10 in Handbook of Heavy-Tailed Distributions in Asset Management and Risk Management, 2019, pp 433-461 from World Scientific Publishing Co. Pte. Ltd.

Abstract: The main topics covered in this chapter are:a description of a method to perform portfolio selection based on normal, multivariate generalized hyperbolic, and multivariate normal tempered stable distributions;a review of the main properties of the average value-at-risk measure;a review of the mean–variance and mean-risk portfolio optimization strategies;an implementation of the minimum-variance and equally weighted portfolio criteria;a review of portfolio performance measures to evaluate and backtest different portfolio strategies;an empirical test showing the portfolio selection performance on a 50-dimensional series of stock returns;an evaluation of different portfolio rebalancing frequencies.

Keywords: Heavy Tail Distributions; Fat Tail Distributions; Lévy Processes; Tempered Stable Distributions; Multivariate Time-changed Brownian Motion; Extreme Value Theory; Risk Management (search for similar items in EconPapers)
JEL-codes: C02 G32 (search for similar items in EconPapers)
Date: 2019
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