Omslagsbillede

Determination the Parameters of Markowitz Portfolio Optimization Model

Guardado en:
Udgivet i:arXiv.org (Oct 22, 2012), p. n/a
Hovedforfatter: Bayraktar, Ertugrul
Andre forfattere: Bilge, Ayse Humeyra
Udgivet:
Cornell University Library, arXiv.org
Fag:
Simulation
Covariance matrix
Markets
Currency exchanges
Computation
Economic conditions
Parameter estimation
Stock exchanges
Computer simulation
Optimization
Portfolio management
Online adgang:Citation/Abstract
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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.
ISSN:2331-8422
Fuente:Engineering Database