Incorporating Value-at-Risk in Portfolio Selection: An Evolutionary Approach
Chueh-Yung Tsao 0, Chao-Kung Liu
0Department of Business Administration, Chang Gung University
Available Online October 2006.
- https://doi.org/10.2991/jcis.2006.321How to use a DOI?
- NSGA-II, mean-variance efficient frontier, mean-VaR efficient frontier, portfolio selection.
- The mean-variance framework for portfolio selection should be revised when investor’s concern is the downside risk. This is especially true when the asset returns are not normal. In this paper, we incorporate value-at-risk (VaR) in portfolio selection and the mean-VaR framework is proposed. Due to the two-objective optimization problem faced by the mean-VaR framework, an evolutionary multi-objective approach is applied to construct the mean-VaR efficient frontier. In particular, the NSGA-II is considered here. From the empirical analysis it is found that the risk-averse investor might inefficiently allocate his wealth if his decision is based on the mean-variance framework.
- Open Access
- This is an open access article distributed under the CC BY-NC license.
Cite this article
TY - CONF AU - Chueh-Yung Tsao AU - Chao-Kung Liu PY - 2006/10 DA - 2006/10 TI - Incorporating Value-at-Risk in Portfolio Selection: An Evolutionary Approach BT - 9th Joint International Conference on Information Sciences (JCIS-06) PB - Atlantis Press SN - 1951-6851 UR - https://doi.org/10.2991/jcis.2006.321 DO - https://doi.org/10.2991/jcis.2006.321 ID - Tsao2006/10 ER -