► We model a multi-objective portfolio optimization problem. ► Particle Swarm Optimization (PSO) algorithm has been used to solve the problem. ► The PSO model is tested on various risk investment ...portfolios. ► The results show that the PSO model are more effective than GAs and VBA solvers.
One of the most studied problems in the financial investment expert system is the intractability of portfolios. The non-linear constrained portfolio optimization problem with multi-objective functions cannot be efficiently solved using traditionally approaches. This paper presents a meta-heuristic approach to portfolio optimization problem using Particle Swarm Optimization (PSO) technique. The model is tested on various restricted and unrestricted risky investment portfolios and a comparative study with Genetic Algorithms is implemented. The PSO model demonstrates high computational efficiency in constructing optimal risky portfolios. Preliminary results show that the approach is very promising and achieves results comparable or superior with the state of the art solvers.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK
This study provides the evidence of the performance of SRI funds in the UK and in France both before and during the financial crisis. We find that in the pre-crisis (2004-2007) period all French and ...UK funds outperformed the market. According to the modified Sharpe ratio, French and UK funds also outperformed during the crisis period (2007-2009) when compared with relative market benchmarks. This result is not confirmed by the Jensen alpha or the Treynor ratio, but these instruments did not indicate significant underperformance. Overall, our results show that while there is no significant difference in financial performance between SRI funds and non-SRI funds.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK, ZRSKP
In this paper, a new bi-objective fuzzy portfolio selection model is proposed, for which Sharp ratio (SR) and Value at Risk ratio (VR) of a portfolio are chosen as objectives. SR is an important ...nonsystematic risk measurement that examines the investment risk by aspiring the diversification of the capital allocation. On the other hand, VR measures the systematic risk, which reduces the largest loss of an investment at a given confidence level. The proposed fuzzy portfolio model assumes both SR and VR as maximization objectives for which the associated fuzzy parameters are considered as triangular fuzzy numbers. The proposed model is solved using multi-objective genetic algorithms, namely multi-objective cellular genetic algorithm (MOCell), archive-based hybrid scatter search (AbYSS), and nondominated sorting genetic algorithm II (NSGA-II). We have used a data set from the Shenzhen Stock Exchange to illustrate the performance of the proposed model and algorithms. Finally, a comparative study in terms of five standard performance metrics is presented, among the MOCell, AbYSS, and NSGA-II algorithms that are mentioned extensively in various research articles to exhibit the best suitable algorithm.
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EMUNI, FIS, FZAB, GEOZS, GIS, IJS, IMTLJ, KILJ, KISLJ, MFDPS, NLZOH, NUK, OBVAL, OILJ, PNG, SAZU, SBCE, SBJE, SBMB, SBNM, UKNU, UL, UM, UPUK, VKSCE, ZAGLJ
This study examines the co-movement and causality relationship between prices of crude oil, precious metals, and agricultural commodities. We use a novel approach called wavelet coherence analysis, ...which allows the measurement of co-movements in the time–frequency space based on the daily prices of commodities. We decompose data from September 1986 to September 2017 into 12 levels and 5 subperiods to find more generalized and convincing results. We confirm that commodity prices are in-phase and co-move. Particularly, the coherence is the largest in the long term and rises sharply in the mid-term during the crisis period. The heterogeneous directions of arrows provide strong evidence that the causality relationship between commodity prices varies over time for different frequencies. We find that the mixed commodities portfolio can provide diversification benefits in the mid-term horizons. The findings of this study can guide investors who want to benefit from diversification while investing in commodity markets.
Agroforestry system has been considered as an efficient solution to reconcile land use conflicts by tree-crop interaction and supplement. However, the water productivity, tradeoffs, and water-use ...portfolios of farm diversification in agroforestry combination with tree and/or crop monocultures are still missing, especially in arid water shortage regions. Based on portfolio theory and farmer perception, this study integrates experimental data, meteorological parameters, farmers questionnaire, and yields and prices to assess water use efficiencies, economic return-risk tradeoffs, and portfolio optimizations of diversification farm systems in Moyu oasis of Northwest China. Results show that all the planting layouts of agroforestry systems provide a better economic income than the combination in mixing agroforestry and monocultures in water-use tradeoffs using Sharp ratio. Moreover, allocating part farm area to the nut/fruit trees can increase economic water-use return compared to more crop cultivations, providing a good complement to farm income. The Sharpe ratios of the walnut/wheat, walnut/maize, and walnut/alfalfa intercropping for 23.70%, 15.71%, and 60.60% give the highest economic water-use return compared to the other planting layouts. Nevertheless, according to the minimum risk portfolio and risk-averse farmers’ preference, the combination of the walnut/wheat, walnut/maize, and walnut/alfalfa intercropping and monocultures of jujube and apricot (the ratios of 32.01%, 27.63%, 8.11%, 9.81 and 22.45%) is recommended to use for planting layout in the study area. It is concluded that the combination with nut/fruit-crop agroforestry and sole nut/fruit tree is a financially efficient diversification strategy to improve the water use efficiency and economic tradeoffs in arid water shortage regions.
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EMUNI, FIS, FZAB, GEOZS, GIS, IJS, IMTLJ, KILJ, KISLJ, MFDPS, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, SBMB, SBNM, UKNU, UL, UM, UPUK, VKSCE, ZAGLJ
The main criterion in investment decisions is to maximize the investors utility. Traditional capital asset pricing models cannot be used when asset returns do not follow a normal distribution. For ...this reason, we use capital asset pricing model with independent and identically asymmetric power distributed (CAPM-IIAPD) and capital asset pricing model with asymmetric independent and identically asymmetric exponential power distributed with two tail parameters(CAPM-AIEPD) to estimate return and risk. When the assumption of normality is violated, the first and second moments lose their efficiency in optimization and we need to use the third and fourth moments. For the first time, we propose independent and identically asymmetric exponential power distributed with two tail parameters. Then, we use higher moments optimization with unequal weights to optimize portfolios. The results indicate that capital asset pricing model with independent and identically asymmetric power distributed (CAPM-IIAPD) is better than asymmetric independent and identically asymmetric exponential power distributed with two tail parameters(CAPM-AIEPD) to estimate return and risk. Adjusted Sharp ratio in portfolio optimization in second moments are higher than others. Adjusted returns to risk in third and fourth moments in the CAPM-IIAPD model significantly differ from the CAPM-AIEPD model and have a better performance.
Conditional Sharpe Ratios Chow, Victor; Lai, Christine W.
Finance research letters,
02/2015, Volume:
12
Journal Article
Peer reviewed
•This paper demonstrates the connection between Sharpe ratio and stochastic dominance.•Conditional Sharpe ratios are statistical ordinates of conditional stochastic dominance.•CSR measures lower ...partial risk-adjusted returns of an asset under market conditions.•Multiple comparisons of CSRs allow us to examine dominance under market conditions.•CSR has predictability for portfolio future performance.
Facing investment choices, investors may care more about potentially excess losses in a downtrend market than excess gains in an upside market. Conditional Sharpe ratios (CSR) are statistical ordinates of conditional stochastic dominance (CSD) that measure lower partial risk-adjusted excess returns of an asset with respect to return distribution on the benchmark. A multiple comparison of serial CSR statistics thus provides an overall view of portfolio performance corresponding to different market scenarios. An example demonstrates that CSR is able to discriminate funds’ downside performance which the conventional Sharpe ratio generally fails to do. A large out-of-sample analysis of US mutual fund shows that CSR has predictability for portfolio future performance.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK
Mutual Funds are becoming effective way for investors to participate in financial markets. An investor must learn to analyze and measure the risk and return of the portfolio. The performance of funds ...is mainly affected by characteristics such as asset size, turnover and fee structure. Investors' highest priority lies in understanding the relation between fund performance and above properties. Currently, the investors depend upon advisors for their financial planning and further no customized tools are available for investment decision. In this article, a fund planner tool called Techno-Portfolio Advisor is proposed, which helps the investors to understand the critical relations and support mutual funds selection across the Asset Management Companies in India. The Techno-Portfolio Advisor is designed based on the fuzzy inference rules by considering the investor preferences like investment amount, age, future goal and return rate. Thus, the Techno-Portfolio Advisor creates awareness among the investor community in choosing the optimal mutual fund scheme as well as to achieve their investment goals.
This article examines how catastrophe events affect risk analysis from a financial perspective. Data from different industries such as Advanced Sustainable Performance Indices, gold, energy, real ...estate, and insurance were collected and analyzed. The performance of these funds was compared by using various financial ratios. Then we tested the stock selecting and market timing abilities. We also assessed whether a particular catastrophe event has affected stock prices by analysis of two event studies, the 9/11 terrorist attacks in the United States and the collapse through bankruptcy of Lehman Brothers. We examined how an asset portfolio performs under catastrophic events and under the situation of adding Advanced Sustainable Performance Indices into an investor's portfolio basket. We found that the 9/11 terrorist attacks affected the Dow Jones Real Estate Index's prices a lot. Lehman Brothers' bankruptcy filing had a positive impact on the CBOE Gold Index, and had a large impact on the Fidelity US Bond Index. The ASPI Index in our optimization problem gave us better diversification. From our analysis, we conclude that portfolio diversification is a good way to hedge against catastrophic risk.
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