1. Optimal Asset Allocation: A Worst Scenario Expectation Approach.
- Author
-
Yuen, Fei and Yang, Hailiang
- Subjects
- *
MARKET volatility , *ASSET allocation , *CONVEX functions , *MATHEMATICAL optimization , *INVESTMENT policy , *STANDARD deviations , *RATE of return - Abstract
Mean-variance criterion has long been the main stream approach in the optimal portfolio theory. The investors try to balance the risk and the return on their portfolio. In this paper, the deviation of the asset return from the investor's expectation in the worst scenario is used as the measure of risk for portfolio selection. One important advantage of this approach is that the investors can base on their own knowledge, information, and preference on various risks, in addition to the asset's volatility, to adjust their exposure to various risks. It also pinpoints one main concern of the investors when they invest, the amount they lose in the worst situation. [ABSTRACT FROM AUTHOR]
- Published
- 2012
- Full Text
- View/download PDF