Word Portfolio Optimization in the Environment of Zero Interest Rate
This paper provides a deep analysis of ten globally diversified portfolios, composed of different financial instruments: bonds, shares, ETF’s, commodities, indexes, currencies, constructed applying various optimization techniques. Statistical moments, such as mean, standard deviation, kurtosis and...
| Main Author: | |
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| Format: | Article |
| Language: | English |
| Published: |
Vilnius University Press
2021-06-01
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| Series: | Ekonomika |
| Subjects: | |
| Online Access: | https://www.zurnalai.vu.lt/ekonomika/article/view/22568 |
| _version_ | 1819052377724944384 |
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| author | Darja Demcenko |
| author_facet | Darja Demcenko |
| author_sort | Darja Demcenko |
| collection | DOAJ |
| description | This paper provides a deep analysis of ten globally diversified portfolios, composed of different financial instruments: bonds, shares, ETF’s, commodities, indexes, currencies, constructed applying various optimization techniques. Statistical moments, such as mean, standard deviation, kurtosis and skewness of portfolios are compared and discussed. Moreover, performance of the portfolios within the time horizon of one year estimating Sharpe ratio, Treynor ratio, Sortino ratio is presented. Furthermore, a risk analysis of created portfolios is evaluated in terms of historical VaR and CVaR applying confidence interval 95%. The main results of this paper reveal that the portfolio, which is optimized to minimize VaR produces high expected shortfall. Secondly, the Risk Parity portfolio, despite reducing volatility, has delivered the highest kurtosis of the return, which may indicate the possible tail loss. Furthermore, the maximum Sharpe ratio portfolio has delivered extremely high kurtosis in comparison with the kurtosis of the other portfolios. Finally, it is observed that for the Naïve diversification portfolio it has been typical to have the highest downside deviation. |
| first_indexed | 2024-12-21T12:18:52Z |
| format | Article |
| id | doaj.art-e411fb913eb24cc389b34beeceacddb4 |
| institution | Directory Open Access Journal |
| issn | 1392-1258 2424-6166 |
| language | English |
| last_indexed | 2024-12-21T12:18:52Z |
| publishDate | 2021-06-01 |
| publisher | Vilnius University Press |
| record_format | Article |
| series | Ekonomika |
| spelling | doaj.art-e411fb913eb24cc389b34beeceacddb42022-12-21T19:04:22ZengVilnius University PressEkonomika1392-12582424-61662021-06-01100110.15388/Ekon.2021.1.9Word Portfolio Optimization in the Environment of Zero Interest RateDarja Demcenko0Vilnius UniversityThis paper provides a deep analysis of ten globally diversified portfolios, composed of different financial instruments: bonds, shares, ETF’s, commodities, indexes, currencies, constructed applying various optimization techniques. Statistical moments, such as mean, standard deviation, kurtosis and skewness of portfolios are compared and discussed. Moreover, performance of the portfolios within the time horizon of one year estimating Sharpe ratio, Treynor ratio, Sortino ratio is presented. Furthermore, a risk analysis of created portfolios is evaluated in terms of historical VaR and CVaR applying confidence interval 95%. The main results of this paper reveal that the portfolio, which is optimized to minimize VaR produces high expected shortfall. Secondly, the Risk Parity portfolio, despite reducing volatility, has delivered the highest kurtosis of the return, which may indicate the possible tail loss. Furthermore, the maximum Sharpe ratio portfolio has delivered extremely high kurtosis in comparison with the kurtosis of the other portfolios. Finally, it is observed that for the Naïve diversification portfolio it has been typical to have the highest downside deviation.https://www.zurnalai.vu.lt/ekonomika/article/view/22568optimizationVaRCVaRSharpe ratioSortino ratioTreynor ratio |
| spellingShingle | Darja Demcenko Word Portfolio Optimization in the Environment of Zero Interest Rate Ekonomika optimization VaR CVaR Sharpe ratio Sortino ratio Treynor ratio |
| title | Word Portfolio Optimization in the Environment of Zero Interest Rate |
| title_full | Word Portfolio Optimization in the Environment of Zero Interest Rate |
| title_fullStr | Word Portfolio Optimization in the Environment of Zero Interest Rate |
| title_full_unstemmed | Word Portfolio Optimization in the Environment of Zero Interest Rate |
| title_short | Word Portfolio Optimization in the Environment of Zero Interest Rate |
| title_sort | word portfolio optimization in the environment of zero interest rate |
| topic | optimization VaR CVaR Sharpe ratio Sortino ratio Treynor ratio |
| url | https://www.zurnalai.vu.lt/ekonomika/article/view/22568 |
| work_keys_str_mv | AT darjademcenko wordportfoliooptimizationintheenvironmentofzerointerestrate |