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Mean-Variance & Mean-VaR Portfolio Selection: A Simulation Based Comparison in the Czech Crisis Environment

Radovan Parrák () and Jakub Seidler
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Radovan Parrák: Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic, http://ies.fsv.cuni.cz/

No 2010/27, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: This paper focuses on two methods for optimum portfolio selection. We compare Mean-Variance method with Mean-VaR method by the means of investment simulation, based on Czech financial market data from turbulent market periods of the year 2007 and the year 2008. We compare both strategies, basing on measurements of relative and absolute profitability of both strategies in crisis periods. The results indicate that both strategies were relatively profitable in both simulation periods. As a consequence of our results, it seems that it is worth to adhering investment decisions to outputs of optimisation algorithms of both methods. Moreover, we consider Mean-VaR strategy to be safer in turbulent times.

Keywords: portfolio optimization; investment strategy; Mean-Variance; Mean-Var (search for similar items in EconPapers)
JEL-codes: C52 G01 G11 (search for similar items in EconPapers)
Pages: 21pages
Date: 2010-11, Revised 2010-11
New Economics Papers: this item is included in nep-cmp, nep-rmg and nep-tra
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