The Optimal Portfolio Model Based on Mean-CvaR with Linear Weighted Sum Method

This paper proposed the optimal portfolio model maximizing returns and minimizing the risk expressed as CvaR under the assumption that the portfolio return subjects to heavy tail. With linear weighted sum method, we solved the multi-objectives model, and compared the model results to the case under...

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Bibliographic Details
Published in2012 Fifth International Joint Conference on Computational Sciences and Optimization pp. 82 - 84
Main Authors Yu, Xing, Tan, Yuling, Liu, Liang, Huang, Wenfeng
Format Conference Proceeding
LanguageEnglish
Published IEEE 01.06.2012
Subjects
CVAR
Gaussian distribution
Investments
linear weighted sum method
Mathematical model
Modeling
multi-objectives programming
Optimization
Portfolios
Reactive power
the optimal portfolio
VAR
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ISBN9781467313650
1467313653
DOI10.1109/CSO.2012.26

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Summary:This paper proposed the optimal portfolio model maximizing returns and minimizing the risk expressed as CvaR under the assumption that the portfolio return subjects to heavy tail. With linear weighted sum method, we solved the multi-objectives model, and compared the model results to the case under the assumption of normal distribution portfolio return, which is based on the portfolio VAR. In an empirical research, it shows that the return in our model is approximate to that of M-V model, but risk is higher than M-V model. It is illustrated that when risk is described as CvaR, it will predict the potential risk of the portfolio, which is helpful for investors to raise awareness of risk.
ISBN:9781467313650
1467313653
DOI:10.1109/CSO.2012.26