Robust portfolio optimization: a stochastic evaluation of worst-case scenarios

This article presents a new approach for building robust portfolios based on stochastic efficiency analysis, by using the Chance Constrained Data Envelopment Analysis (CCDEA) model and periods of market downturn, i.e. worst-state market. The is able to accommodate investors who exhibit different risk behaviors empirical analysis done assets traded Brazil Stock Exchange, B3 (Brasil, Bolsa, Balcão). results confirm that proposed achieved at same time reduced systematic maximized portfolio returns when working with worse state data higher levels aversion. A level aversion also led better risk-return ratios, which can be seen in Sharpe ratio values.