Empirical Verification of World’s Regions Profitability in Dynamic International Investment Strategy
DOI:
https://doi.org/10.12775/DEM.2013.008Keywords
optimal portfolio, Value at Risk, Expected Shortfall, international dependencyAbstract
The main goal of the work is to present the empirical verification of the investment attractiveness in a given world financial region. The attractiveness of a region is represented by the share of assets from this region in the optimal portfolio. The multivariate GARCH model has been used to describe international dependencies. Optimal portfolios based on Value at Risk and Expected Shortfall minimization have been compared to the Markowitz portfolio. Indications, which should be taken into account by investors willing to invest in different world regions, have been presented as the result
References
Aas, K., Czado, C., Frigessi, A., Bakken, H. (2009), Pair-Copula Constructions of Multiple Dependence. Insurance, Mathematics and Economics, 44(2), 182–198, DOI: http://dx.doi.org/10.1016/j.insmatheco.2007.02.001.
Artzner, P., Delbaen, F., Eber, J., Heath, D. (1999), Coherent Measures of Risk. Mathematical Finance, 9, 203–228, DOI: http://dx.doi.org/10.1111/1467-9965.00068.
Billio, M., Caporin, M, Gobbo, M., Flexible Dynamic Conditional Correlation Multivariate GARCH Models for Asset Allocation, Applied Financial Economics Letters, 2(2), 123–130, DOI: http://dx.doi.org/10.1080/17446540500428843.
Bollerslev, T. (1990), Modeling the Coherence in Short-Run Nominal Exchange Rates: A Multivariate Generalized ARCH Model, Review of Economics and Statistics, 72, 498–505, DOI: http://dx.doi.org/10.2307/2109358.
Cappiello, L., Engle, R., Sheppard, K. (2006), Asymmetric Dynamics in the Correlations of Global Equity and Bond Returns, Journal of Financial Econometrics, 4, 537–572, DOI: http://dx.doi.org/10.1093/jjfinec/nbl005.
Engle, R. F. (2002), Dynamic Conditional Correlation: a Simple Class of Multivariate Gener-alized Autoregressive Conditional Heteroskedasticity Models, Journal of Business and Economic Statistics, 20, 339–350, DOI: http://dx.doi.org/10.1198/073500102288618487.
Föllmer, H., Schied, A. (2011), Stochastic Finance: An Introduction in Discrete Time, Walter de Gruyter Berlin, New York, DOI: http://dx.doi.org/10.1515/9783110212075.
Ghalanos, A. (2013), The Rmgarch Models: Background and Properties, CRAN, http://cran.r-project.org/web/packages/rmgarch/vignettes/The_rmgarch_models.pdf (9.04.2013).
Markowitz, H. M. (1959), Portfolio Selection: Efficient Diversification of Investments, New York: John Wiley & Sons.
Palomba, G. (2008), Multivariate GARCH Models and the Black-Litterman Approach for Tracking Error Constrained Portfolios: an Empirical Analysis, Global Business and Economics Review, 10(4), 379–413, DOI: http://dx.doi.org/10.1504/GBER.2008.020592.
Pelletier, D. (2006), Regime-switching for Dynamic Correlation, Journal of Econometrics, 131, 445-473, DOI: http://dx.doi.org/10.1016/j.jeconom.2005.01.013.
Rockafellar, R. T., Uryasev, S. (2000), Optimization of Conditional Value-at-Risk, Journal of Risk, 2, 21–41.
Rockafellar, R. T., Uryasev, S. (2002), Conditional Value-at-Risk for General Loss Distribu-tions, Journal of Banking and Finance, 26, 1443–1471, DOI: http://dx.doi.org/10.1016/S0378-4266(02)00271-6.
Tse, Y. K., Tsui, A. K. C. (2002), A Multivariate Generalized Autoregressive Conditional Heteroscedasticity Model with Time-Varying Correlations, Journal of Business and Economic Statistics, 20, 351–362, DOI: http://dx.doi.org/10.1198/073500102288618496.
Downloads
Published
How to Cite
Issue
Section
License
The journal provides an Open Access to its content based on the non-exclusive licence Creative Commons (CC BY-ND 4.0).
To enable the publisher to disseminate the author's work to the fullest extent, the author must agrees to the terms and conditions of the License Agreement with Nicolaus Copernicus University.
Stats
Number of views and downloads: 423
Number of citations: 0
