Risk measures and portfolio construction in different economic scenarios

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

This paper compared the composition and performance of portfolios constructed by employing different risk measures utilizing the Malaysian share market data in three diverse economic scenarios. The risk measures considered were the mean-variance (MV) and their alternatives; the semi-variance (SV), mean absolute deviation (MAD) and conditional value at risk (CVAR). The data were divided into three sub-periods representing the growth period in the economy, financial crisis and the recovery period. The results of this study showed different optimal portfolios' performances and compositions for the three economic periods. Nevertheless, among the risk models tested, CVAR(0.99) model gave the highest portfolio skewness. High skewness means that the probability of getting large negative returns is decreased. As a conclusion, for the Malaysian stock market, the CVAR(0.99) model is the most appropriate portfolio optimization model for downside risk aversion investors in all three economic scenarios.

Original languageEnglish
Pages (from-to)875-880
Number of pages6
JournalSains Malaysiana
Volume42
Issue number6
Publication statusPublished - Jun 2013

Fingerprint

Portfolio construction
Risk measures
Risk model
Economics
Conditional value at risk
Scenarios
Skewness
Portfolio composition
Mean-variance
Downside risk aversion
Financial crisis
Optimization model
Semivariance
Portfolio optimization
Investors
Portfolio performance
Deviation
Stock market
Market data
Optimal portfolio

Keywords

  • Optimization
  • Return
  • Share market
  • Skewness
  • Variance

ASJC Scopus subject areas

  • General

Cite this

Risk measures and portfolio construction in different economic scenarios. / Jaaman @ Sharman, Saiful Hafizah; Lam, Weng Hoe; Isa, Zaidi.

In: Sains Malaysiana, Vol. 42, No. 6, 06.2013, p. 875-880.

Research output: Contribution to journalArticle

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