Portfolio Optimization based on the Risk Minimization by the Weight-Modified CVaR vs. CVaR Method
Given the lack of a specific approach to the explanation of values of optimal portfolio weights in the portfolio optimization, the present study aimed to examine large-scale portfolio optimization according to both stock weighting and utilization of SCAD function to minimize the portfolio risk based...
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| Format: | Article |
| Language: | English |
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Iran Finance Association
2022-04-01
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| Series: | Iranian Journal of Finance |
| Subjects: | |
| Online Access: | https://www.ijfifsa.ir/article_144997_024c231468b1c86ab1853ff5e9772095.pdf |
| _version_ | 1828127571407011840 |
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| author | Mohammad Esmaeil Fadaeinejad Mohamad Taghi Vaziri Hossein Asadi Mohammad Javad Faryadras |
| author_facet | Mohammad Esmaeil Fadaeinejad Mohamad Taghi Vaziri Hossein Asadi Mohammad Javad Faryadras |
| author_sort | Mohammad Esmaeil Fadaeinejad |
| collection | DOAJ |
| description | Given the lack of a specific approach to the explanation of values of optimal portfolio weights in the portfolio optimization, the present study aimed to examine large-scale portfolio optimization according to both stock weighting and utilization of SCAD function to minimize the portfolio risk based on the "weight-modified conditional value at risk (CVaR)" and its comparison with the "conditional value at risk (CVaR)" method in the Tehran Stock Exchange. Therefore, the price information of companies listed in the Tehran Stock Exchange and Over-the-counter (OTC) from 2012 to the end of September 2020 was collected, screened, and analyzed daily, and then the risk and return of the portfolios were examined by forming optimal portfolios. The results indicated that the efficiency limit of the stock portfolio and also the ranks of different companies were different according to the types of the optimization method. Based on the behavior of the TEDPIX, the investors' degrees of risk-taking, and the risk management, diversification, and computational complexity of each method, the weight-modified CVaR had a better performance due to better diversification and risk management. Furthermore, the SCAD function added computational complexity to this method. |
| first_indexed | 2024-04-11T15:52:12Z |
| format | Article |
| id | doaj.art-5d0e323b888545dcbb0beadc128a2e10 |
| institution | Directory Open Access Journal |
| issn | 2676-6337 2676-6345 |
| language | English |
| last_indexed | 2024-04-11T15:52:12Z |
| publishDate | 2022-04-01 |
| publisher | Iran Finance Association |
| record_format | Article |
| series | Iranian Journal of Finance |
| spelling | doaj.art-5d0e323b888545dcbb0beadc128a2e102022-12-22T04:15:16ZengIran Finance AssociationIranian Journal of Finance2676-63372676-63452022-04-0162709410.30699/ijf.2021.311328.1281144997Portfolio Optimization based on the Risk Minimization by the Weight-Modified CVaR vs. CVaR MethodMohammad Esmaeil Fadaeinejad0Mohamad Taghi Vaziri1Hossein Asadi2Mohammad Javad Faryadras3Associate Prof., Department of Financial Management and Insurance, Shahid Beheshti University, Tehran, Iran.Assistant Prof, Department of Financial Management and Insurance, Shahid Beheshti University, Tehran, Iran.Associate Prof., Department of Financial Management and Insurance, Shahid Beheshti University, Tehran, Iran.Ph.D. Candidate, Department of Financial Management and Insurance, Shahid Beheshti University, Tehran, Iran.Given the lack of a specific approach to the explanation of values of optimal portfolio weights in the portfolio optimization, the present study aimed to examine large-scale portfolio optimization according to both stock weighting and utilization of SCAD function to minimize the portfolio risk based on the "weight-modified conditional value at risk (CVaR)" and its comparison with the "conditional value at risk (CVaR)" method in the Tehran Stock Exchange. Therefore, the price information of companies listed in the Tehran Stock Exchange and Over-the-counter (OTC) from 2012 to the end of September 2020 was collected, screened, and analyzed daily, and then the risk and return of the portfolios were examined by forming optimal portfolios. The results indicated that the efficiency limit of the stock portfolio and also the ranks of different companies were different according to the types of the optimization method. Based on the behavior of the TEDPIX, the investors' degrees of risk-taking, and the risk management, diversification, and computational complexity of each method, the weight-modified CVaR had a better performance due to better diversification and risk management. Furthermore, the SCAD function added computational complexity to this method.https://www.ijfifsa.ir/article_144997_024c231468b1c86ab1853ff5e9772095.pdfportfolio optimizationconditional value at risk (cvar)smoothly-clipped absolute deviation (scad) penalty function |
| spellingShingle | Mohammad Esmaeil Fadaeinejad Mohamad Taghi Vaziri Hossein Asadi Mohammad Javad Faryadras Portfolio Optimization based on the Risk Minimization by the Weight-Modified CVaR vs. CVaR Method Iranian Journal of Finance portfolio optimization conditional value at risk (cvar) smoothly-clipped absolute deviation (scad) penalty function |
| title | Portfolio Optimization based on the Risk Minimization by the Weight-Modified CVaR vs. CVaR Method |
| title_full | Portfolio Optimization based on the Risk Minimization by the Weight-Modified CVaR vs. CVaR Method |
| title_fullStr | Portfolio Optimization based on the Risk Minimization by the Weight-Modified CVaR vs. CVaR Method |
| title_full_unstemmed | Portfolio Optimization based on the Risk Minimization by the Weight-Modified CVaR vs. CVaR Method |
| title_short | Portfolio Optimization based on the Risk Minimization by the Weight-Modified CVaR vs. CVaR Method |
| title_sort | portfolio optimization based on the risk minimization by the weight modified cvar vs cvar method |
| topic | portfolio optimization conditional value at risk (cvar) smoothly-clipped absolute deviation (scad) penalty function |
| url | https://www.ijfifsa.ir/article_144997_024c231468b1c86ab1853ff5e9772095.pdf |
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