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Portfolio optimization under mean-CVaR simulation with copulas on the Vietnamese stock exchange

Tuan Anh Le and Thi Thanh Binh Dao

MPRA Paper from University Library of Munich, Germany

Abstract: This paper studies how to construct and compare various optimal portfolio frame-works for investors in the context of the Vietnamese stock market. The aim of the study is to help investors to find solutions for constructing an optimal portfolio strategy using modern investment frameworks in the Vietnamese stock market. The study contains a census of the top 43 companies listed on the Ho Chi Minh stock exchange (HOSE) over the ten-year period from July 2010 to January 2021. Optimal portfolios are constructed using Mean-Variance Framework, Mean-CVaR Framework under different copula simulations. Two-thirds of the data from 26/03/2014 to 27/1/2021 consists of the data of Vietnamese stocks during the COVID-19 recession, which caused depression globally; however, the results obtained during this period still provide a consistent outcome with the results for other periods. Furthermore, by randomly attempting different stocks in the research sample, the results also perform the same outcome as previous analyses. At about the same CvaR level of about 2.1%, for example, the Gaussian copula portfolio has daily Mean Return of 0.121%, the t copula portfolio has 0.12% Mean Return, while Mean-CvaR with the Raw Return portfolio has a lower Return at 0.103%, and the last portfolio of Mean-Variance with Raw Return has 0.102% Mean Return. Empirical results for all 10 portfolio levels showed that CVaR copula simulations significantly outperform the historical Mean-CVaR framework and Mean-Variance framework in the context of the Vietnamese stock exchange.

Keywords: Gaussian copula; t copula; simulation; Mean-CVaR; Mean-Variance; portfolio optimization; Vietnam (search for similar items in EconPapers)
JEL-codes: C61 G11 G17 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-cmp, nep-cwa, nep-fmk, nep-rmg and nep-sea
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Published in Investment Management and Financial Innovations 2.18(2021): pp. 273-286

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