Title: Empirical Study on Portfolio Theory Introducing VaR and ES Constraint
Abstract: Aiming at the need of controlling market risk of institutional investors, this paper introduced value at risk (VaR) and expected shortfall (ES) constraint into the mean-variance portfolio theory, and demonstrated the effect of VaR and ES constraint on portfolio performance using A-shares data in China from 1995 to 2002. The results show that arbitrairy choosing one and keeping the left random movement (among) the four choices such as risk constraint in existence or not, risk constraint's type(VaR vs. ES), high or low confidence level, and limit size, the risk-adjusted performance of portfolio when risk constraint in existence or ES constraint or high confidence level or small limit size is all significantly better than the risk-adjusted performance of the corresponding portfolio, while the results for the portfolio performance are completely opposite.
Publication Year: 2005
Publication Date: 2005-01-01
Language: en
Type: article
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