title: |
Incorporating Value-at-Risk in Portfolio Selection: An Evolutionary Approach |
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publication: |
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part of series: |
Advances in Intelligent Systems Research | |
ISBN: |
978-90-78677-01-7 | |
ISSN: |
1951-6851 | |
DOI: |
doi:10.2991/jcis.2006.321 (how to use a DOI) | |
author(s): |
Chueh-Yung Tsao, Chao-Kung Liu |
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corresponding author: |
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publication date: |
October 2006 |
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keywords: |
NSGA-II, mean-variance efficient frontier, mean-VaR efficient frontier, portfolio selection. |
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abstract: |
The mean-variance framework for portfolio selection should be revised when investor’s concern is the downside risk. This is especially true when the asset returns are not normal. In this paper, we incorporate value-at-risk (VaR) in portfolio selection and the mean-VaR framework is proposed. Due to the two-objective optimization problem faced by the mean-VaR framework, an evolutionary multi-objective approach is applied to construct the mean-VaR efficient frontier. In particular, the NSGA-II is considered here. From the empirical analysis it is found that the risk-averse investor might inefficiently allocate his wealth if his decision is based on the mean-variance framework. |
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copyright: |
©
Atlantis Press. This article is distributed under the
terms of the Creative Commons Attribution License, which permits
non-commercial use, distribution and reproduction in any medium,
provided the original work is properly cited. |
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full text: |