Paper Info
Title
On the effectiveness of scenario generation techniques in single-period portfolio optimization
Abstract
In single-period portfolio selection problems the expected value of both the risk measure and the portfolio return have to be estimated. Historical data realizations, used as equally probable scenarios, are frequently used to this aim. Several other parametric and non-parametric methods can be applied. When dealing with scenario generation techniques practitioners are mainly concerned on how reliable and effective such methods are when embedded into portfolio selection models. In this paper we survey different techniques to generate scenarios for the rates of return. We also compare the techniques by providing in-sample and out-of-sample analysis of the portfolios obtained by using these techniques to generate the rates of return. Evidence on the computational burden required by the different techniques is also provided. As reference model we use the Worst Conditional Expectation model with transaction costs. Extensive computational results based on different historical data sets from London Stock Exchange Market (FTSE) are presented and some interesting financial conclusions are drawn.
Year
DOI
Venue
2009
10.1016/j.ejor.2007.09.042
European Journal of Operational Research
Keywords
Field
DocType
Risk management,Conditional value at risk,Portfolio optimization,Scenario generation,Mixed integer linear programming
Application portfolio management,Project portfolio management,Post-modern portfolio theory,Portfolio,Portfolio optimization,Rate of return on a portfolio,Risk measure,Operations management,Mathematics,Expected shortfall
Journal
Volume
Issue
ISSN
192
2
0377-2217
Citations 
PageRank 
References 
15
0.88
3
Authors
3
Name
Order
Citations
PageRank
Gianfranco Guastaroba11488.95
Renata Mansini257443.10
Maria Grazia Speranza3121777.86