1. A NOTE ON THE IMPACT OF NON LINEAR REWARD AND RISK MEASURES.
- Author
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Biglova, Almira, Ortobelli, Sergio, Rachev, Svetlozar (Zari) T., and Stoyanov, Stoyan
- Subjects
COPULA functions ,EMPIRICAL research ,RISK assessment ,BENCHMARKING (Management) ,MATHEMATICAL optimization ,WEALTH - Abstract
In this note, we examine the impact of non linear reward and risk measures on portfolio selection. In particular, we compare the ex-post final wealth sample paths of strategies based on the Sharpe ratio and strategies based on non-linear reward/risk measures. As suggested by the recent literature, we model dependencies with an asymmetric t copula estimated on the innovations of the marginals that follow an ARMA-GARCH type model. Therefore, we first simulate future scenarios, on the basis of which allocation decisions are made, and then we compare the ex-post final wealth obtained with non-linear risk and reward strategies and the wealth obtained with classic portfolio strategies. [ABSTRACT FROM AUTHOR]
- Published
- 2010