Portfolio selection in downside risk optimization approach: application to the Hong Kong stock market

Portfolio selection with higher moments

“…Other three moment optimization methods include using negative semi-variance in place of variance (Markowitz 1959, Markowitz et al 1993. A similar measure of downside risk is incorporated by Feiring et al (1994) and Konno et al (1993) who use an approximation to the lower semi-third moment in their Mean-Absolute DeviationSkewness portfolio model.y These methods rest on the assumption that an investor's expected utility is reasonably approximated by inserting estimates of the moments of an assumed sampling model. Chiu (2008) examines the relationship between expected utility maximization and stochastic dominance.…”

Changes and trends in the investment environment before and after the COVID-19 outbreak

“…Arenas-Parra et al [13] introduced vague goals for return rate, risk and liquidity based on expected intervals. A measure of downside risk is incorporated by Feiring, Wong, Poon, and Chan [14] , and Konno, Shirakawa, and Yamazaki [15] who use an approximation to the lower semi-third moment in their Mean-Absolute Deviation-Skewness portfolio model. Konno and Yamazaki proposed the mean absolute deviation model as an alternative to the mean variance model claiming that it retains all the positive features of the mean variance model , not only saves computing time but also does not require the covariance matrix.…”

Dynamic portfolio management under competing representations

“…Alternatives to the Markowitz mean‐variance approach have focused on, e.g. possibilities to incorporate other risk measures than variance into the formulation (Feiring et al , 1994), gaining computational savings through linear representations of risk (for example, the mean absolute deviation (MAD) formulation discussed in Konno and Yamazaki (1991) and Simaan (1997)), recognizing asymmetric returns (Konno et al (1993), transactions costs (Adcock and Meade, 1994; Mulvey and Vladimirou, 1992; Yoshimoto, 1996) etc. A good overview of some representative approaches is given in Chang et al (2000).…”