Portfolio Selection under Maximum Minimum Criterion

Ding, Yongsheng

doi:10.1007/s11135-005-1054-0

Cited by 14 publications

(5 citation statements)

References 12 publications

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“…Second, as noted from the kurtosis values in the descriptive data, the monthly data do not exhibit strict symmetry and hence at best weakly support normal distribution. Future studies could look into alternative methods of portfolio optimization, which relaxes the assumption of normality and hence allows higher frequency data to be considered (Karandikar and Sinha 2012;Ding 2006). Third, our beta-adjusted returns are based on an equally weighted return index, which could have some influence on the exclusiveness of the naïve portfolio against the market portfolios under different scenarios.…”

Section: Discussionmentioning

confidence: 99%

Portfolios under Different Methods and Scenarios: A Case of Fiji’s South Pacific Stock Exchange

Kumar

Stauvermann

2022

JRFM

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In this study, we analyze portfolio performance under different methods and scenarios for the small island economy of Fiji. In addition to documenting the historical performance and the smallness of the stock market, the study looks at the possibility of opting for an equally weighted (naïve) portfolio against market and minimum variance portfolios. To this end, we extract monthly stock price data of 17/19 listed companies from August 2019 to July 2022 and invoke different approaches to develop portfolios under different scenarios. We consider the mean-variance, minimum variance, semi-variance, utility maximization, and minimum turbulence portfolios, based on beta-adjusted (CAPM-based) returns. The different portfolios presented in the study should provide some insights on asset allocation in Fiji’s stock market. Interestingly, unlike average returns, the beta-adjusted returns indicate that an equally weighted portfolio can yield relatively higher expected returns than market portfolios, although, with a relatively higher standard deviation and lower Sharpe ratio than the optimized results. In a semi-variance analysis (where we account for downside risk only), equally weighted portfolio yields superior returns, albeit with a relatively lower Sortino ratio. Given that Fiji’s stock market is currently a small, with a relatively small number of listed companies, potential and less sophisticated investors and analysts considering portfolios based on beta-adjusted returns, may simply opt for 1/N (naïve) portfolios as a diversification strategy while realizing decent expected returns. The optimized portfolio under mean-variance, semi-variance, and utility are presented as alternative considerations for nuanced investors. Additionally, equally weighted turbulence-adjusted and minimum-turbulence portfolios are constructed to capture periods of unusualness and calmness in the market. The methodologies and the results presented can be adjusted and applied to other small markets and hence can influence investment decisions of investors in creating diversified portfolios under different scenarios.

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Section: Discussionmentioning

confidence: 99%

Portfolios under Different Methods and Scenarios: A Case of Fiji’s South Pacific Stock Exchange

Kumar

Stauvermann

2022

JRFM

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“…Minimaks modelin genellikle daha başarılı olduğu sonucuna ulaşmışlardır. Ding (2006), çalışmasında maksimum, minimum kriteri altında portföy seçim sorununu incelemiştir. Doğrusal ve doğrusal olmayan programlamadan faydalanarak çözüm için bir algoritma sağlamıştır.…”

Section: Oyun Teorisi Yaklaşımıyla Portföy Optimizasyonu üZerine Literatür Değerlendirmesiunclassified

Oyun Teori̇si̇ Yaklaşimi İle Portföy Opti̇mi̇zasyonu Üzeri̇ne Li̇teratür Değerlendi̇rmesi̇

Pekkaya¹,

Gümüş²

2020

International Journal of Management Economics and Business

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güncel ve önem verildiğinin göstergesidir. Bu çalışmada, oyun teorisi yaklaşımının kullanıldığı ulusal/ uluslararası literatüre ait pay senedi ile portföy optimizasyonu çalışmalarının, özellikle amaç/yöntem açısından karşılaştırmalı olarak değerlendirilmesi, sonuçlarının araştırmacılar ile karar vericilere sunulması amaçlanmıştır. Bu anlamda, portföy ile oyun teorisi temelinde, özellikle bu iki konuyu birlikte araştıran yaklaşık 300 kadar bilimsel çalışma incelenmiş ve konuya yakınlığı açısından 51 kadarı değerlendirilmiştir. İlgili literatürde, oyun teorisi ile pay senedi temelinde portföy optimizasyonunu birlikte dikkate alan çalışmaların özellikle son yıllarda yayınlandığı ve konulardaki yayınlar arasında makale sayısının oldukça az olduğu görülmüştür. Bu durum, ilgili alanda yapılacak çalışmaları önemini arttırdığı şeklinde yorumlanmıştır. Çalışmaların çoğunluğu özellikle minimaks/maksimin temelinde oyun modellerini kullanırken, kısmen farklı oyun yaklaşımları da modellemelere dahil edilmiştir. Optimizasyon modellemelerinde, Markowitz Ortalama Varyans yaklaşımı çerçevesinde portföy oluşturma kriterlerinin yaygın olarak kullanımına ve çözümlenmesinde ise özellikle doğrusal programlama gibi yöneylem tekniklerinin kullanıldığı çalışmalara oldukça fazla rastlanmıştır.

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“…There is a large body of research on linear programming models such as the Minimax model, and Mansini et al (2003) provide a systemtatic overview as well as a discussion of their properties. Ding (2006) considers Minimax models without explicitly requiring a minimum return, as we will do in this paper.…”

Section: Introductionmentioning

confidence: 99%

Minimax: Portfolio Choice Based on Pessimistic Decision Making

Schaarschmidt¹,

Schanbacher²

2014

IJEF

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We propose a fund allocation strategy for a highly risk-averse investor based on pessimistic decision making to construct portfolios of four major asset classes. Using US data (indexes of stocks, bonds, real estate, and commodities) from January 1990 to December 2010, we find that the proposed Minimax strategy performs well out-of-sample with respect to standard risk measures. Its performance is better than common alternative trading strategies such as fixed weights, minimum variance, or mean-variance methods. Portfolio weights are stable across time, resulting in lower turnover than any mean-variance related strategy. Finally, we find that optimal portfolios are widely diversified across all asset classes. This study suggests that the proposed Minimax strategy is implementable in portfolio management, and of special importance for investors with daily risk management.

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Portfolio Selection under Maximum Minimum Criterion

Abstract: Decision-making, maximum minimum criterion, portfolio selection, uncertainty, maximum loss risk,

Cited by 14 publications

References 12 publications

Portfolios under Different Methods and Scenarios: A Case of Fiji’s South Pacific Stock Exchange

Portfolios under Different Methods and Scenarios: A Case of Fiji’s South Pacific Stock Exchange

Oyun Teori̇si̇ Yaklaşimi İle Portföy Opti̇mi̇zasyonu Üzeri̇ne Li̇teratür Değerlendi̇rmesi̇

Minimax: Portfolio Choice Based on Pessimistic Decision Making

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