Mean-variance investment strategy applied in emerging financial markets: Evidence from the Colombian stock market

Optimization of Foreign Exchange using Kelly Criteria Model

“…In every investment, an analysis of expected returns and risks is assumed to be a fundamental step. Investments in financial assets are no exception [8]. The selection of assets is made with the aim of giving investors maximum returns with a certain level of risk or ensuring minimal risk for certain returns [9].…”

“…One measure of risk is standard deviation, which is the square root of variance. Variants of a portfolio are stated as follows: (8) Furthermore, the covariance of all asset returns can be expressed in the form of a matrix of equation (8) as follows:…”

“…Many studies show that one way to control risk is to diversify [1], which is to form an investment portfolio. The portfolio selection theory proposed by Markowitz in 1952, this methodology has become a benchmark in portfolio management [8]. According to Markowitz's Modern Portfolio Theory (MPT), the optimal portfolio is based on a balance between risk and return, where risk gives the investor maximum return at a certain risk level, or the lowest risk level at a certain rate of return [2].…”

Speed of Mean Reversion: An Empirical Analysis of Kse, Lse and Ise Indices

“…Further, after careful analysis the blame for drastic crises was put on the policies that were created by the financial system (e.g., İzgi, Duran 2016;Neaime 2015;Shaffer 2010;etc.). Making different econometricians, and financial practitioners from all around the world to question that is the foundation of the whole system based on a false assumption of efficient market hypothesis (e.g., Mtunya et al 2016;García et al 2015;Malkiel 2003;etc.). Thus, the growth of discontentment with this theory causes researchers to work on other theories that could help them to explain the market phenomenon.…”

“…On the contrary, excessive volatility is not observed in the case of a long run as the prices revert to their historical prices. Thus, considering long run it leads to the conclusion that, changes in prices in long run is same for both efficient markets and mean reversion (e.g., İzgi, Duran 2016;García et al 2015;Engle, Morris 1991;etc.). These implications have caused mean reversion to prove itself as a successful method of trading and investing for the financial practitioners by developing various strategies such as contrarian and statistical arbitrage.…”