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Stempien, J. P., and S. H. Chan. "Addressing energy trilemma via the modified Markowitz Mean-Variance Portfolio Optimization theory." Applied Energy 202 (September 2017): 228–37. http://dx.doi.org/10.1016/j.apenergy.2017.05.145.
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Simplício, Jalimar Guimarães, Celso Funcia Lemme, and Ricardo Pereira Câmara Leal. "Portfolio theory in the selection of oil investment projects." Gestão & Produção 19, no. 2 (2012): 265–72. http://dx.doi.org/10.1590/s0104-530x2012000200003.
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The objective of this article is to compare investment project selection using the efficient frontier in the mean-variance space based on optimization models introduced by Markowitz (1952) with the project ranking method according to the profitability index (PI). The selection of real assets by companies did not incorporate the mean-variance optimization procedure in the same way the selection of financial assets in investment portfolios did. The process of selection and formation of portfolios of investment projects for the oil area of a company in the energy industry was analyzed. Project portfolios formed according to the usual company practice of ranking by their PI were compared with those that result from applying mean-variance optimization through Monte Carlo simulation, which allows the computation of mean returns, variances, and covariances for the set of projects considered. The inefficiency of project portfolios obtained by ranking according to the PI compared to those obtained by the method of Markowitz suggests that there are opportunities to improve the process of selecting the set of projects to be implemented by companies.
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Zhang, Peng, and Jing Yi Zhou. "Empirical Research of Portfolio Selection under M-SAD Model." Applied Mechanics and Materials 380-384 (August 2013): 4409–12. http://dx.doi.org/10.4028/www.scientific.net/amm.380-384.4409.
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The mean semi-absolute deviation is the extension and development from the mean-variance theory which proposed by Markowitz. This paper studied the Mean-SAD (semi-variance deviation) model without the short selling and used the Chinese securities markets 20 stocks to test the efficient of the model. We got the conclusion that M-SAD model can effectively direct the decision in portfolio selection. Based on the result of the empirical research, the paper prospects the application of M-SAD model in our country.
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Harzallah, Amen Aissi, and Mouna Boujelbene Abbes. "The Impact of Financial Crises on the Asset Allocation: Classical Theory Versus Behavioral Theory." Journal of Interdisciplinary Economics 32, no. 2 (September 17, 2019): 218–36. http://dx.doi.org/10.1177/0260107919848629.
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The aim of this article is to compare the portfolio optimization generated by the behavioral portfolio theory (BPT) and the mean variance theory (MVT) by investigating the impact of the global financial crisis on the asset allocation. We use data from the Canadian Stock Exchange over the 2002–2015 period. By comparing both approaches, we show that for any level of aspiration and admissible failure, the BPT optimal portfolio will always contain a part of the mean–variance frontier. Thus, in the case of higher degree of risk aversion induced by typical BPT investors, the security set is located on the upper right of the Markowitz frontier. However, even if the optimal portfolios of MVT and BPT may coincide, MVT investors associated with an extremely low degree of risk aversion will not systematically choose BPT optimal portfolios. Our results also indicate the period of financial crisis generate huge losses in MVT portfolio values that implies a lower expected return and a higher level of risk. Furthermore, we point out the absence of the BPT optimal portfolio when potential losses are higher during the 2008 global financial crisis. JEL: G11, G17, G40
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Vasylieva, Natalia. "Application of Markowitz Portfolio Theory to Producing the World Major Field Crops." Agris on-line Papers in Economics and Informatics 12, no. 4 (December 30, 2020): 123–31. http://dx.doi.org/10.7160/aol.2020.120409.
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Development of growing cereals and oilseeds is a pressing issue for providing global food security and renewable energy. The study deals with applying methods of portfolio theory to mitigate natural and marketing uncertainties emerged from unstable yields and volatile prices for wheat, maize, barley, sunflower, soybeans, and rapeseed. The research outcome based on the utilization of Markowitz mean-variance indicators made possible to evaluate portfolio performances of the world top cereals and oilseeds producers. The study findings at a country level combined econometric forecasting of the crop revenues and modeling optimal portfolios of cereals and oilseeds subject to acceptable trade-offs between risks and expected revenues. The fulfilled calculations with Ukrainian focus clarified farmland allocations under cereal and oilseed crops to underpin biodiversity and keep firm positions in the world markets.
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Nurwahidah, Nurwahidah. "QUADRATIC PROGRAMMING: AN OPTIMIZATION TOOL FOR BUILDING GLOBAL MINIMUM VARIANCE PORTFOLIO WITH NO SHORT SALE." BAREKENG: Jurnal Ilmu Matematika dan Terapan 15, no. 2 (June 1, 2021): 305–14. http://dx.doi.org/10.30598/barekengvol15iss2pp305-314.
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Quantitative method in portfolio selection is a fascinating issue to make a decision in investment. Portfolio optimization is a very important to manage investment risk. There are many papers dealing with the Markowitz portfolio model, but not all of the papers studied about positive weight portfolio or no short sale constrained portfolio. Positive weight portfolio describes that short sale is allowed for the investor. While, short sale is banned in a certain economic condition due to its ability in decreasing stock market index. Besides, Islamic capital market does not allow speculative transaction such as short selling. Hence, portfolio with no short sale constraint is needed. This study aims to build Global Minimum Variance Portfolio (GMVP) with no short sale constraint. The GMVP with positive asset allocation based on Markowitz model can be built by using quadratic programming with interior point method. The main theory applied in this research is Markowitz portfolio optimization model. Mean and variance of stocks closing price are two things that should be considered in this model. The result shows that the positive weight of GMVP includes 0% of ADRO shares; 2, 65% of ANTM shares; 0% of CTRA shares; 30,27% of EXCL shares; 37,21% of ICBP shares; 3,37% of INCO shares; 13,89% of KLBF shares; 0% of PGAS shares; and 12,61% of PTBA shares.
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Guo, Haifeng, BaiQing Sun, Hamid Reza Karimi, Yuanjing Ge, and Weiquan Jin. "Fuzzy Investment Portfolio Selection Models Based on Interval Analysis Approach." Mathematical Problems in Engineering 2012 (2012): 1–15. http://dx.doi.org/10.1155/2012/628295.
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This paper employs fuzzy set theory to solve the unintuitive problem of the Markowitz mean-variance (MV) portfolio model and extend it to a fuzzy investment portfolio selection model. Our model establishes intervals for expected returns and risk preference, which can take into account investors' different investment appetite and thus can find the optimal resolution for each interval. In the empirical part, we test this model in Chinese stocks investment and find that this model can fulfill different kinds of investors’ objectives. Finally, investment risk can be decreased when we add investment limit to each stock in the portfolio, which indicates our model is useful in practice.
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Boangmanalu, Andi Ivand Markemo, and Puput Tri Komalasari. "PORTOFOLIO MARKOWITZ: UJI OPTIMAL HOLDING PERIOD DAN KINERJA PORTOFOLIO BERDASARKAN KRITERIA RISIKO DAN TARGET RETURN." Jurnal Manajemen Indonesia 15, no. 2 (April 14, 2017): 115. http://dx.doi.org/10.25124/jmi.v15i2.710.
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The concept of mean-variance optimization, developed by Markowitz, is the cornerstone of modern finance theory. The objective of this portfolio construction is to minimize investment risk by forming optimal portfolios. Dynamic movement in capital markets requires not only changes in portfolio composition. Optimal portfolio is not only determined by the covariance between securities in the portfolio, but also by holding period. The aims of this study is to answer two research questions. The first research question is how long the optimal holding period that was resulted from trade-off between risk and return. This study using target return that are determined hypothetically as well as the risk criteria are divided into 3 namely the mean variance, semivarians and expected loss. Target returns are simulated in this study were divided into 3 criteria namely aggressive, moderate and conservative. The second research question is whether there are differences among the various portfolio performance based on criteria of risk and target return. Portfolio performance is measured by using excess return and the Sharpe index. In this study, stocks covered in LQ-45 index are used to construct efficient portoflio. Monthly price series for company and LQ-45 index for February 2004 to September 2008 are collected. The analysis found that optimal holing period is ranges between 1-5 months. Holding period of a portfolio that more than 5 months will provide risk and return trade-off less favorable. In addition this study found that there was no significant differences in portfolio performance based on overall scenarios
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Lee, Hong Jae, Tae Seog Kim, Kwon Woo Kim, and Sang In Lee. "Asset Allocation Effects of Risk Aversion in Optimal Asset Allocation Using the Mean-Variance Model of Markowitz and Separation Theory of Tobin's Two-Fund." Academic Society of Global Business Administration 15, no. 2 (April 30, 2018): 269–307. http://dx.doi.org/10.38115/asgba.2018.15.2.269.
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Sun, Yen. "Optimization Stock Portfolio With Mean-Variance and Linear Programming: Case In Indonesia Stock Market." Binus Business Review 1, no. 1 (May 26, 2010): 15. http://dx.doi.org/10.21512/bbr.v1i1.1018.
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It is observed that the number of Indonesia’s domestic investor who involved in the stock exchange is very less compare to its total number of population (only about 0.1%). As a result, Indonesia Stock Exchange (IDX) is highly affected by foreign investor that can threat the economy. Domestic investor tends to invest in risk-free asset such as deposit in the bank since they are not familiar yet with the stock market and anxious about the risk (risk-averse type of investor). Therefore, it is important to educate domestic investor to involve in the stock exchange. Investing in portfolio of stock is one of the best choices for risk-averse investor (such as Indonesia domestic investor) since it offers lower risk for a given level of return. This paper studies the optimization of Indonesian stock portfolio. The data is the historical return of 10 stocks of LQ 45 for 5 time series (January 2004 – December 2008). It will be focus on selecting stocks into a portfolio, setting 10 of stock portfolios using mean variance method combining with the linear programming (solver). Furthermore, based on Efficient Frontier concept and Sharpe measurement, there will be one stock portfolio picked as an optimum Portfolio (Namely Portfolio G). Then, Performance of portfolio G will be evaluated by using Sharpe, Treynor and Jensen Measurement to show whether the return of Portfolio G exceeds the market return. This paper also illustrates how the stock composition of the Optimum Portfolio (G) succeeds to predict the portfolio return in the future (5th January – 3rd April 2009). The result of the study observed that optimization portfolio using Mean-Variance (consistent with Markowitz theory) combine with linear programming can be applied into Indonesia stock’s portfolio. All the measurements (Sharpe, Jensen, and Treynor) show that the portfolio G is a superior portfolio. It is also been found that the composition (weights) stocks of optimum portfolio (G) can be used to predict the forward return (5th January – 3rd April 2009). It is shown that the stock portfolio return of 5th January – 3rd April 2009) has exceeded the market return for the same period of time based on Sharpe and Treynor measurement.
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Kresta, Aleš. "Application of Performance Ratios in Portfolio Optimization." Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis 63, no. 6 (2015): 1969–77. http://dx.doi.org/10.11118/actaun201563061969.
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The cornerstone of modern portfolio theory was established by pioneer work of Harry Markowitz. Based on his mean-variance framework, Sharpe formulated his well-known Sharpe ratio aiming to measure the performance of mutual funds. The contemporary development in computer’s computational power allowed to apply more complex performance ratios, which take into account also higher moments of return probability distribution. Although these ratios were proposed to help the investors to improve the results of portfolio optimization, we empirically demonstrated in our paper that this may not necessarily be true. On the historical dataset of DJIA components we empirically showed that both Sharpe ratio and MAD ratio outperformed Rachev ratio. However, for Rachev ratio we assumed only one level of parameters value. Different set-ups of parameters may provide different results and thus further analysis is certainly required.
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Maimó-Far, Aina, Alexis Tantet, Víctor Homar, and Philippe Drobinski. "Predictable and Unpredictable Climate Variability Impacts on Optimal Renewable Energy Mixes: The Example of Spain." Energies 13, no. 19 (October 2, 2020): 5132. http://dx.doi.org/10.3390/en13195132.
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We analyzed the role of predictable and unpredictable variability in the identification of optimal renewable energy mixes in an electricity system. Renewable energy sources are the fastest growing energy generation technology, but the variable nature of production linked to climate variability raises structural, technological and economical issues. This work proposes the differentiation of the treatment applied to predictable and unpredictable variability in the context of Markowitz portfolio theory for optimal renewable deployment. The e4clim model was used as a tool to analyze the impact of predictable sources of generation variability on the optimal renewable energy mixes. Significant differences appeared, depending on the consideration of risk, all of them showing room for improvement with respect to the current situation. The application of the methods developed in this study is encouraged in mean-variance analyses, since its contribution favors scenarios where unpredictable variability in the climate-powered renewable energy sources are considered for their risk introduction.
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Fahmy, Hany. "Mean-variance-time: An extension of Markowitz's mean-variance portfolio theory." Journal of Economics and Business 109 (May 2020): 105888. http://dx.doi.org/10.1016/j.jeconbus.2019.105888.
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Zaimovic, Azra, Almira Arnaut-Berilo, and Arnela Mustafic. "Portfolio Diversification in the South-East European Equity Markets." South East European Journal of Economics and Business 12, no. 1 (April 1, 2017): 126–35. http://dx.doi.org/10.1515/jeb-2017-0010.
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AbstractDiversification potential enables investors to manage their risk and decrease risk exposure. Good diversification policy is a safety net that prevents a portfolio from losing its value. A well-diversified portfolio consists of different categories of property with low correlations, while highly correlated markets have the feature of low possibilities for diversification. The biggest riddle in the world of investments is to find the optimal portfolio within a set of available assets with limited capital. There are numerous studies and mathematical models that deal with portfolio investment strategies. These strategies take advantage of diversification by spreading risk over several financial assets. Modern portfolio theory seeks to find the optimal model with the best results. This paper tries to identify relationships between returns of companies traded in South-East European equity markets. A Markowitz mean-variance (MV) portfolio optimization method is used to identify possibilities for diversification among these markets and world leading capital markets. This research also offers insight into to the level of integration of South-East European equity markets. Principal component analysis (PCA) is used to determine components that describe the strong patterns and co-movements of the dataset. Finally, we combined MV efficient frontier and equity, which represent PCA components, to draw conclusions. Our findings show that PC analysis substantially simplifies asset selection process in portfolio management. The results of the paper have practical applications for portfolio investors.
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Liu, Shijing, Hongyu Jin, Chunlu Liu, Benzheng Xie, and Anthony Mills. "Investment apportionments among participants of PPP rental retirement villages." Built Environment Project and Asset Management 10, no. 1 (November 28, 2019): 64–77. http://dx.doi.org/10.1108/bepam-02-2019-0018.
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Purpose The purpose of this paper is to examine public–private partnership (PPP) approaches for the construction of rental retirement villages in Australia and to allocate the investment proportions under a certain project return rate among three investors which are the government, private sectors and pension funds. The apportionment will achieve a minimum overall investment risk for the project. Design/methodology/approach Capital structure, particularly determination of investment apportionment proportions, is one of the key factors affecting the success of PPP rental retirement villages. Markowitz mean-variance model was applied to examine the investment allocations with minimum project investment risks under a certain projected return rate among the PPP partners for the construction of rental retirement villages. Findings The research findings validate the feasibility of the inclusion of pension funds in the construction of PPP rental retirement villages and demonstrate the existence of relationships between the project return rate and the investment allocation proportions. Originality/value This paper provides a quantitative approach for determination of the investment proportions among PPP partners to enrich the theory of PPP in relation to the construction of rental retirement villages. This has implications for PPP partners and can help these stakeholders make vital contributions in developing intellectual wealth in the PPP investment area while providing them with a detailed guide to decision making and negotiation in relation to investment in PPP rental retirement villages.
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Mounir, Amine Mohammed. "Prudence and temperance in portfolio selection with Shariah-compliant investments." International Journal of Islamic and Middle Eastern Finance and Management 14, no. 4 (February 26, 2021): 753–66. http://dx.doi.org/10.1108/imefm-07-2019-0292.
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Purpose This paper aims to explore the impact of Sharīʿah-compliant stocks on other investor risk preferences beyond the risk aversion, namely, prudence and temperance. Design/methodology/approach This paper uses the non-parametric model data envelopment analysis with the shortage function as a measure of performance. The model uses three specifications considering skewness and kurtosis that describe according to expected utility theory, prudence and temperance. Findings Results show that first, efficient portfolios consist mainly of conventional stocks in the three-model specification. Second, the skewness improvement is achieved only when considering conventional stocks while Sharīʿah-compliant assets do not exhibit any impact on the third moment. Finally, diversification through both conventional and Sharīʿah-compliant stocks does not lead to kurtosis reduction. Sharīʿah-compliant stocks in efficient portfolios are sensitive to return and risk solely, and hence, prudence and temperance as related to skewness and kurtosis measures can be ignored in optimal portfolio selection during normal market conditions. Research limitations/implications Findings suggest the same conclusions for four Islamic screening methods; however, readers should be prudent due to the limited sample. Results show that Sharīʿah-compliant assets do not have an impact on higher-order moments optimal portfolio returns, and hence, question the commonly admitted assumption of non-normality return distributions at least for Sharīʿah-compliant stocks. Practical implications The research findings suggest that Islamic investor preferences are described only by return and risk along with Sharīʿah criteria for stock selection and portfolio allocation. Portfolio managers should not care about higher-order moments to manage Sharīʿah-compliant funds. The traditional mean-variance Markowitz framework will be sufficient for investment or allocation decision-making. Description of Sharīʿah-compliant portfolio returns with only the first two order moments gives such asset more resiliency to extreme events like a crisis. Originality/value This research is the first in literature exploring whether prudence and temperance defined by higher-order moments can be drivers, besides Sharīʿah criteria, in portfolio allocation decision-making. This study is unique in terms of methodology and application. It uses individual stock data on the Casablanca Stock Exchange.
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Das, Sanjiv, Harry Markowitz, Jonathan Scheid, and Meir Statman. "Portfolio Optimization with Mental Accounts." Journal of Financial and Quantitative Analysis 45, no. 2 (February 19, 2010): 311–34. http://dx.doi.org/10.1017/s0022109010000141.
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AbstractWe integrate appealing features of Markowitz’s mean-variance portfolio theory (MVT) and Shefrin and Statman’s behavioral portfolio theory (BPT) into a new mental accounting (MA) framework. Features of the MA framework include an MA structure of portfolios, a definition of risk as the probability of failing to reach the threshold level in each mental account, and attitudes toward risk that vary by account. We demonstrate a mathematical equivalence between MVT, MA, and risk management using value at risk (VaR). The aggregate allocation across MA subportfolios is mean-variance efficient with short selling. Short-selling constraints on mental accounts impose very minor reductions in certainty equivalents, only if binding for the aggregate portfolio, offsetting utility losses from errors in specifying risk-aversion coefficients in MVT applications. These generalizations of MVT and BPT via a unified MA framework result in a fruitful connection between investor consumption goals and portfolio production.
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Lee, Cheng-Wen, and Dolgion Gankhuyag. "Portfolio Optimization in Post Financial Crisis of 2008-2009 in the Mongolian Stock Exchange." Jurnal METRIS 21, no. 01 (June 1, 2020): 47–58. http://dx.doi.org/10.25170/metris.v21i01.2432.
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In this study, we present the Mongolian stock market’s performance post phenomenal financial crisis of 2008-2009, opportunities to invest and the risks problems. For analysis of the study, we used financial portfolio optimization models with restricted structure, mathematical statistic methods and financial methods. First, we considered about portfolio optimization in the Mongolian Stock Exchange using Markowitz’s modern portfolio theory and Telser’s safety first model. We used MSE weekly trading data chosen 50 most traded stocks out of 237 stocks listed at the MSE between 2009 and 2013. We generated 50 weeks mean-variance portfolio and safety first portfolio for 2014 and discussed. We considered weekly investment in the MSE using mean-variance portfolio andsafety first portfolio. The mean-variance portfolio has the best performance of weekly portfolio return with average weekly return and cumulative return. We found stable portfolio against investing risk and did back-test the result. For prospect investors in the MSE, we suggest invest and earn high return in the MSE.
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López de Prado, Marcos, Ralph Vince, and Qiji Jim Zhu. "Optimal Risk Budgeting under a Finite Investment Horizon." Risks 7, no. 3 (August 5, 2019): 86. http://dx.doi.org/10.3390/risks7030086.
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The Growth-Optimal Portfolio (GOP) theory determines the path of bet sizes that maximize long-term wealth. This multi-horizon goal makes it more appealing among practitioners than myopic approaches, like Markowitz’s mean-variance or risk parity. The GOP literature typically considers risk-neutral investors with an infinite investment horizon. In this paper, we compute the optimal bet sizes in the more realistic setting of risk-averse investors with finite investment horizons. We find that, under this more realistic setting, the optimal bet sizes are considerably smaller than previously suggested by the GOP literature. We also develop quantitative methods for determining the risk-adjusted growth allocations (or risk budgeting) for a given finite investment horizon.
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Yeter, Baran, and Yordan Garbatov. "Optimal Life Extension Management of Offshore Wind Farms Based on the Modern Portfolio Theory." Oceans 2, no. 3 (August 24, 2021): 566–82. http://dx.doi.org/10.3390/oceans2030032.
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The present study aims to develop a risk-based approach to finding optimal solutions for life extension management for offshore wind farms based on Markowitz’s modern portfolio theory, adapted from finance. The developed risk-based approach assumes that the offshore wind turbines (OWT) can be considered as cash-producing tangible assets providing a positive return from the initial investment (capital) with a given risk attaining the targeted (expected) return. In this regard, the present study performs a techno-economic life extension analysis within the scope of the multi-objective optimisation problem. The first objective is to maximise the return from the overall wind assets and the second objective is to minimise the risk associated with obtaining the return. In formulating the multi-dimensional optimisation problem, the life extension assessment considers the results of a detailed structural integrity analysis, a free-cash-flow analysis, the probability of project failure, and local and global economic constraints. Further, the risk is identified as the variance from the expected mean of return on investment. The risk–return diagram is utilised to classify the OWTs of different classes using an unsupervised machine learning algorithm. The optimal portfolios for the various required rates of return are recommended for different stages of life extension.
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Luo, Jingzheng, Jiasheng Guo, and Hui Li. "An Analysis of Cross-sectional Investment Portfolio with the Consideration of Risk and Return." E3S Web of Conferences 235 (2021): 01036. http://dx.doi.org/10.1051/e3sconf/202123501036.
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Recently, investors are requiring diversified options on the security investment, while the sudden incidents, such as the trade war and the pandemic of COVID-19, make the investment market more volatile and turbulent. Thus, this article will discuss how investors can make rational investment decisions by using the Markowitz’s portfolio theory and its Mean-Variance Model in the U.S. investment market, in order to meet the requirement of diversification and to earn relatively stable profit. Therefore, the data spanning from 2016 to 2020 is used to provide investors with more reliable and comprehensive investment information. Meanwhile, a novel cross-section portfolio is given to fulfill the diversified and innovative investment needs of investors. The industries included are car industry, biopharmaceutical industry and financial service industry. Furthermore, the results reflect the actual situation to a large extent, including the weakness in the US market in December 2018 due to uncertain Fed policy and the impact of the COVID-19 in 2020. In this article, an Intra-Industry analysis based on the net asset values of the three targeted industries will be carried out first, then the Macro analysis will be conducted based on the optimal portfolio of the three industries. A conclusion of the findings is included at the end of the article.
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Benjlijel, Bacem. "Mean–variance combining rules that outperform naïve diversification." International Journal of Financial Engineering, June 5, 2021, 2141007. http://dx.doi.org/10.1142/s2424786321410073.
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The mean–variance framework developed by Markowitz (1952). Portfolio selection, The Journal of Finance, 7(1), 77–91 is still the major model used nowadays in asset allocation and active portfolio management. However, the estimated mean–variance rules often fail to deliver superior performance compared with the simple naïve rule (the equally weighted portfolio) due to the problem of estimation errors. In this paper, I propose a portfolio construction method that is effective in dealing with estimation errors in the optimization process. Particularly, I specify the portfolio weights as an optimal combination of the equally weighted portfolio and a sample zero-investment portfolio. I show analytically that the proposed method alleviates the problem of estimation errors and dominates naïve diversification. I suggest two implementable versions of the combining method and show, empirically, their good performances relative to the naïve rule. The newly developed rules work well, particularly, for portfolios with a medium and high number of assets. Moreover, the outperformance persists generally even in the presence of transaction costs. Since the combinations are theory-based, my study may be interpreted as reaffirming the usefulness of the Markowitz portfolio theory in practice.
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Dranev, Yury. Journal of Corporate Finance Research / Корпоративные Финансы | ISSN: 2073-0438 6, no. 1 (May 22, 2012): 33–36. http://dx.doi.org/10.17323/j.jcfr.2073-0438.6.1.2012.33-36.
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Author: Yuri Y. Dranev National Research University The Higher School of Economics dranioff@hotmail.com
The variance and semivariance are traditional measures of asset returns volatility since Markowitz proposed the market portfolio theory. Well known models for expected asset returns were developed under assumptions of mean-variance or mean-semivariance investor’s behavior. But numerous papers provided arguments against these models because of unrealistic assumptions and controversial empiric evidence. More complicated models with downside risk measures experienced difficulties with applications. The new model based on the special form of the investor’s utility function is proposed in this paper.
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Nahvi, Abouzar, Mohammad Ghorbani Ghorbani, Mahmoud Sabouhi, Arash Dourandish, Arash Dourandish, Arash Dourandish, and Arash Dourandish. "OPTIMAL ALLOCATION OF BANK CREDITS TO APPLICANTS IN AGRICULTURAL SECTORS." PLANT ARCHIVES 21, no. 1 (April 19, 2021). http://dx.doi.org/10.51470/plantarchives.2021.v21.no1.070.
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Credit portfolio management is one of the fundamental aspects of banking that can lead to the loss of bank revenue if not properly managed. The expected return and risk in the choice of portfolio cannot be accurately predicted. Considering this impossibility and given the limitations faced by the banking system, this article uses the concept of interval numbers in the Fuzzy Set Theory to extend the Markowitz mean variance model to a non-linear interval multi-objective model. Three strategies were presented in this model, including optimistic, pessimistic, and mixed strategies, and the Genetic algorithm was used to solve the model. This model was ultimately examined at Keshavarzi Bank to determine the optimal credit portfolioCredit portfolio management is one of the fundamental aspects of banking that can lead to the loss of bank revenue if not properly managed. The expected return and risk in the choice of portfolio cannot be accurately predicted. Considering this impossibility and given the limitations faced by the banking system, this article uses the concept of interval numbers in the Fuzzy Set Theory to extend the Markowitz mean variance model to a non-linear interval multi-objective model. Three strategies were presented in this model, including optimistic, pessimistic, and mixed strategies, and the Genetic algorithm was used to solve the model. This model was ultimately examined at Keshavarzi Bank to determine the optimal credit portfolio. The results showed that this bank’s risk, thus leading to the proper management of loans.
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Stanković, Jelena Z., Evica Petrović, and Ksenija Denčić-Mihajlov. "EFFECTS OF APPLYING DIFFERENT RISK MEASURES ON THE OPTIMAL PORTFOLIO SELECTION: THE CASE OF THE BELGRADE STOCK EXCHANGE." Facta Universitatis, Series: Economics and Organization, April 13, 2020, 017. http://dx.doi.org/10.22190/fueo191016002s.
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Despite its wide use in practice, Modern Portfolio Theory and Markowitz’s approach to optimization, which is based on quadratic programming and the first two moments of the probability distribution of returns as major parameters, was faced with criticism. Therefore, standard Mean-Variance approach had been modified by applying more appropriate risk measures in optimization algorithm. The aim of this paper is to indicate efficiency of these models as well as justification of their usage in managing stocks portfolio on the Belgrade Stock Exchange.
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Ahmadi, Hamid, and Cesar Galindo. "Two Staged Portfolio Optimizations." Journal of Business & Economics Research (JBER) 3, no. 4 (February 9, 2011). http://dx.doi.org/10.19030/jber.v3i4.2765.
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The primary goal of this work is to determine if an active portfolio optimization strategy utilizing a two staged optimization approach outperforms an ordinary optimization technique. Both portfolio optimization models are based on Markowitz’s Modern Portfolio Theory (MPT), which relies on assets’ mean, variance, and correlation to maximize returns at any given level of risk. For the two staged optimization approach the process of optimization is applied twice. In the first stage, it is used to select an optimal portfolio of industries, and in the second stage optimization is applied to determine an optimal portfolio consisting of stocks within each industry. Our research indicates that portfolios formed based on ordinary optimization outperforms two staged portfolios and Market indexes by 37% during a bear market (2002) and outperforms Dow Jones Industrial Average and S&P 500 by more than 13% during a bull market (2003). The performance of each model was determined by the capital gains and the dividend returns during the 2002 to 2003 time period.
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Gulseven, Osman, and Ozgun Ekici. "The role of real estate and gold as inflation hedges: the Islamic influence." International Journal of Islamic and Middle Eastern Finance and Management ahead-of-print, ahead-of-print (December 4, 2020). http://dx.doi.org/10.1108/imefm-01-2019-0038.
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Purpose This paper aims to understand how aversion to interest income in Islam may influence the demand for real estate and gold when inflation is rampant. Design/methodology/approach According to Markowitz’s mean-variance model, an optimal portfolio is one that blends maximum return with minimum variance. In investment portfolios, real estate and gold serve as inflation hedges. For religious reasons, many Muslims exclude interest-earning assets from their portfolios, however. This paper explores how this attitude influences the hedging role of real estate and gold when inflation is rampant. This paper compares optimal portfolios that include and do not include interest-earning assets. In the calculations, this study uses monthly Turkish data from 1997 until 2018. Findings The analysis shows that the best hedging instrument against inflation is an interest-earning asset. In its absence, the role of real estate and gold as inflation hedges markedly increases: For a medium-return and medium-risk portfolio, for instance, the portfolio share of gold holdings increases from 3.16% to 58.43% and that for real estate increases from 14.97% to 24.06%. Originality/value This paper is a pioneering work on the influence of Islam on the roles of real estate and gold as inflation hedges when inflation is rampant. It provides an explanation from financial theory for the strong real estate and gold demand in Turkey in the past two decades.