Portfolio optimization constrained by performance attribution

Artikel

This paper investigates performance attribution measures as a basis for constraining portfolio optimization. We employ optimizations that minimize conditional value-at-risk and investigate two performance attributes, asset allocation (AA) and the selection effect (SE), as constraints on asset weights. The test portfolio consists of stocks from the Dow Jones Industrial Average index. Values for the performance attributes are established relative to two benchmarks, equi-weighted and price-weighted portfolios of the same stocks. Performance of the optimized portfolios is judged using comparisons of cumulative price and the risk-measures: maximum drawdown, Sharpe ratio, Sortino-Satchell ratio and Rachev ratio. The results suggest that achieving SE performance thresholds requires larger turnover values than that required for achieving comparable AA thresholds. The results also suggest a positive role in price and risk-measure performance for the imposition of constraints on AA and SE.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Journal of Risk and Financial Management ; ISSN: 1911-8074 ; Volume: 14 ; Year: 2021 ; Issue: 5 ; Pages: 1-12 ; Basel: MDPI

Classification and Topics

• Classification: Wirtschaft
• Subject: portfolio optimization ; asset allocation ; performance attribution ; selection effect

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hu, Yuan ; Lindquist, W. Brent ; Račev, Svetlozar T.
• Event: Veröffentlichung
• (who): MDPI
• (where): Basel
• (when): 2021

Further information

• DOI: doi:10.3390/jrfm14050201
• Handle: http://hdl.handle.net/10419/239617
• Last update: 10.03.2025, 11:41 AM CET