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    Robust multi-period portfolio selection based on downside risk with asymmetrically distributed uncertainty set

    74724.pdf (1.604Mb)
    Access Status
    Open access
    Authors
    Ling, A.
    Sun, Jie
    Wang, M.
    Date
    2019
    Type
    Journal Article
    
    Metadata
    Show full item record
    Citation
    Ling, A. and Sun, J. and Wang, M. 2019. Robust multi-period portfolio selection based on downside risk with asymmetrically distributed uncertainty set. European Journal of Operational Research.
    Source Title
    European Journal of Operational Research
    DOI
    10.1016/j.ejor.2019.01.012
    ISSN
    0377-2217
    School
    School of Electrical Engineering, Computing and Mathematical Science (EECMS)
    Funding and Sponsorship
    http://purl.org/au-research/grants/arc/DP160102819
    URI
    http://hdl.handle.net/20.500.11937/74439
    Collection
    • Curtin Research Publications
    Abstract

    Motivated by the asymmetrical attitudes of investors towards downside losses and upside gains, this paper proposes a robust multi-period portfolio selection model based on downside risk with asymmetrically distributed uncertainty set, in which the downside losses of a portfolio are controlled by the lower partial moment (LPM). A computationally tractable approximation approach based on second-order cone optimization is used for solving the proposed model. We show in theory that the optimal solution of the robust model can generate a given probability guarantee for individual and joint stochastic constraints. The effect of the asymmetrically distributed uncertainty set on performance of the optimal solution is analyzed by the usual comparative static method. Comprehensive numerical comparisons with real market data are reported and indicate that the proposed model can obtain the smaller standard deviation and turnover ratios which reduce the Sharpe ratios of optimal portfolio, compared with some well-known models in the literature.

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