Portfolio Optimization with Risk Decomposition
https://doi.org/10.38050/01300105201754
Abstract
The paper offers the modification of traditional portfolio optimization approach to construct the portfolio with possibility to control both systematic and specific risk (portfolio with risk decomposition). Built on modern econometric tools, the author estimates and forecasts the dynamics of alphas and betas of stocks in the frame of CAPM model , which are further applied for portfolio optimization. The closing weekly prices of 10 Australian stocks and ASX Index as the market index during the period from July 2000 to July 2016 were used. Within the sample there is no evidence of arbitrage on the Australian equity market employing neutral beta portfolio. The study confirms that portfolios with risk decomposition outperform Markowitz’s one according to various performance indicators.
About the Author
K. G. Asaturov
National research University "Higher school of Economics"
Russian Federation
Russian Federation
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Review
For citations:
Asaturov K.G. Portfolio Optimization with Risk Decomposition. Moscow University Economics Bulletin. 2017;(5):61-85. (In Russ.) https://doi.org/10.38050/01300105201754
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