Determination the Parameters of Markowitz Portfolio Optimization Model
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| Publicado en: | arXiv.org (Oct 22, 2012), p. n/a |
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| Autor principal: | |
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| Publicado: |
Cornell University Library, arXiv.org
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| Materias: | |
| Acceso en línea: | Citation/Abstract Full text outside of ProQuest |
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| Resumen: | The main purpose of this study is the determination of the optimal length of the historical data for the estimation of statistical parameters in Markowitz Portfolio Optimization. We present a trading simulation using Markowitz method, for a portfolio consisting of foreign currency exchange rates and selected assets from the Istanbul Stock Exchange ISE 30, over the period 2001-2009. In the simulation, the expected returns and the covariance matrix are computed from historical data observed for past n days and the target returns are chosen as multiples of the return of the market index. The trading strategy is to buy a stock if the simulation resulted in a feasible solution and sell the stock after exactly m days, independently from the market conditions. The actual returns are computed for n and m being equal to 21, 42, 63, 84 and 105 days and we have seen that the best return is obtained when the observation period is 2 or 3 times the investment period. |
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| ISSN: | 2331-8422 |
| Fuente: | Engineering Database |