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Incorporating value-at-risk in portfolio selection: An evolutionary approach

  • Chang Gung University

Research output: Chapter in Book/Report/Conference proceedingConference contributionpeer-review

3 Scopus citations

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 meanVaR 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.

Original languageEnglish
Title of host publicationProceedings of the 9th Joint Conference on Information Sciences, JCIS 2006
DOIs
StatePublished - 2006
Event9th Joint Conference on Information Sciences, JCIS 2006 - Taiwan, ROC, Taiwan
Duration: 08 10 200611 10 2006

Publication series

NameProceedings of the 9th Joint Conference on Information Sciences, JCIS 2006
Volume2006

Conference

Conference9th Joint Conference on Information Sciences, JCIS 2006
Country/TerritoryTaiwan
CityTaiwan, ROC
Period08/10/0611/10/06

Keywords

  • Mean-VaR efficient frontier
  • Mean-variance efficient frontier
  • NSGA-II
  • Portfolio selection

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