A Factor Analysis Approach of International Portfolio Diversification: Does it Pay Off?

Făt, Codruța Maria; Dezsi, Eva

doi:10.1016/s2212-5671(12)00209-2

Cited by 5 publications

(2 citation statements)

References 41 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…A frequently used approach is the Bayesian approach (Markowitz and Usmen 2003;Shi and Irwin 2005;Levy and Levy 2014;Stefanovits et al 2014), which considers sampling error and uncertainty to estimate parameters under predictive distribution of asset returns. Maximum likelihood estimation (MLE) is a popular method to estimate the sample mean and covariance, which is widely used for diversification of stock market portfolio (e.g., Pandher 2001;Valadkhani et al 2008;Făt and Dezsi 2012;Lingaraja et al 2015). Maximum likelihood estimation constructs an estimator in order to estimate the unknown distribution parameters (P) from the observed data.…”

Section: Parameter Estimation For Portfolio Modelmentioning

confidence: 99%

Robustness-based portfolio optimization under epistemic uncertainty

Asadujjaman

Zaman

2018

J Ind Eng Int

View full text Add to dashboard Cite

In this paper, we propose formulations and algorithms for robust portfolio optimization under both aleatory uncertainty (i.e., natural variability) and epistemic uncertainty (i.e., imprecise probabilistic information) arising from interval data. Epistemic uncertainty is represented using two approaches: (1) moment bounding approach and (2) likelihood-based approach. This paper first proposes a nested robustness-based portfolio optimization formulation using the moment bounding approachbased representation of epistemic uncertainty. The nested robust portfolio formulation is simple to implement; however, the computational cost is often high due to the epistemic analysis performed inside the optimization loop. A decoupled approach is then proposed to un-nest the robustness-based portfolio optimization from the analysis of epistemic variables to achieve computational efficiency. This paper also proposes a single-loop robust portfolio optimization formulation using the likelihood-based representation of epistemic uncertainty that completely separates the epistemic analysis from the portfolio optimization framework and thereby achieves further computational efficiency. The proposed robust portfolio optimization formulations are tested on real market data from five S&P 500 companies, and performance of the robust optimization models is discussed empirically based on portfolio return and risk.

show abstract

Section: Parameter Estimation For Portfolio Modelmentioning

confidence: 99%

Robustness-based portfolio optimization under epistemic uncertainty

Asadujjaman

Zaman

2018

J Ind Eng Int

View full text Add to dashboard Cite

show abstract

“…The economic gains from international equity diversification are still substantial despite the growing markets correlation (Bouslama & Ouda, 2014). On the same line, Maria and Eva (2012) concluded that as the markets become more integrated the co-movements between markets tend to rise, undermining the benefits of IPD. However, the study of Majdoub and Monsour (2013) on volatility spillovers between US and five (5) Islamic emergent equity markets found weak correlation over time.…”

Section: Literature Reviewmentioning

confidence: 99%

The Contribution of African Capital Markets in the Diversification of European Investment Portfolios

Barreto¹

2018

IJEF

View full text Add to dashboard Cite

This study aims to evaluate the contribution of the African capital markets in the diversification of European investment portfolios. The study used the methodology based on the application of optimization models like Mean Variance (MV), Resample Michaud (RM), SemiVariance (SV), Mean Absolute Deviation (MAD) and Filtered Historical Simulation (FHS). In-Sample and Out-of-Sample approaches were used to analyze the data. The study results suggested the existence of a strong correlation between some African capital markets and European capital markets, that is, they tend to move in the same direction. The most important being the diversification of global portfolio with assets of African capital markets generate benefits for both types of investors; that is, it provides benefits in the return and reduce investment risk. Still, the study result suggested that the foreign investors should look for an African capital markets with a chance to maximize their wealth and diversify the investment risk in their portfolios. In the same order, the study result went further to elaborate contribute to on the advantage of the international diversification and furthermore contribute to the literature through application of the Filtered Historical Simulation (FHS) method in the optimization portfolio. This methodology, In addition to producing good results, is more restrained in the composition of investment portfolios than the other methods.

show abstract

International portfolio of stock indices with spatiotemporal correlations: Can investors still benefit from portfolio, when and where?

Tan

Zhang

et al. 2019

The North American Journal of Economics and Finance

View full text Add to dashboard Cite

A Factor Analysis Approach of International Portfolio Diversification: Does it Pay Off?

Cited by 5 publications

References 41 publications

Robustness-based portfolio optimization under epistemic uncertainty

Robustness-based portfolio optimization under epistemic uncertainty

The Contribution of African Capital Markets in the Diversification of European Investment Portfolios

International portfolio of stock indices with spatiotemporal correlations: Can investors still benefit from portfolio, when and where?

Contact Info

Product

Resources

About