Comparative studies of stochastic portfolio construction models with geometric average rate of return

Sejoon Park; Shiwoo Lee; Tao Yao

Comparative studies of stochastic portfolio construction models with geometric average rate of return

Sejoon Park, Shiwoo Lee, Tao Yao

Research output: Contribution to conference › Paper › peer-review

Abstract

Every investment has the return and the risk. The portfolio needs to be determined to maximize the return and to minimize the risk. This paper compares two stochastic linear programming models to construct investment portfolio; mean-lower semiabsolute deviation (LSAD) model and Conditional Value-at-Risk (CVaR) constraint model. As a performance measure for investment decision when scenarios for only a single period are known, geometric average rate of return (GARR) is proposed. The comparative studies show that GARR is a good risk-adjusted rate of return for single-period investment problems.

Original language	English (US)
Pages	1504-1509
Number of pages	6
State	Published - 2008
Event	IIE Annual Conference and Expo 2008 - Vancouver, BC, Canada Duration: May 17 2008 → May 21 2008

Other

Other	IIE Annual Conference and Expo 2008
Country/Territory	Canada
City	Vancouver, BC
Period	5/17/08 → 5/21/08

All Science Journal Classification (ASJC) codes

Computer Science Applications
Software
Industrial and Manufacturing Engineering

Cite this

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abstract = "Every investment has the return and the risk. The portfolio needs to be determined to maximize the return and to minimize the risk. This paper compares two stochastic linear programming models to construct investment portfolio; mean-lower semiabsolute deviation (LSAD) model and Conditional Value-at-Risk (CVaR) constraint model. As a performance measure for investment decision when scenarios for only a single period are known, geometric average rate of return (GARR) is proposed. The comparative studies show that GARR is a good risk-adjusted rate of return for single-period investment problems.",

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AU - Park, Sejoon

AU - Lee, Shiwoo

AU - Yao, Tao

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AB - Every investment has the return and the risk. The portfolio needs to be determined to maximize the return and to minimize the risk. This paper compares two stochastic linear programming models to construct investment portfolio; mean-lower semiabsolute deviation (LSAD) model and Conditional Value-at-Risk (CVaR) constraint model. As a performance measure for investment decision when scenarios for only a single period are known, geometric average rate of return (GARR) is proposed. The comparative studies show that GARR is a good risk-adjusted rate of return for single-period investment problems.

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M3 - Paper

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T2 - IIE Annual Conference and Expo 2008

Y2 - 17 May 2008 through 21 May 2008

ER -

Comparative studies of stochastic portfolio construction models with geometric average rate of return

Abstract

Other

All Science Journal Classification (ASJC) codes

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