The returns and risks of investment portfolio in a financial system was investigated by constructing a theoreticalmodel based on the Hestonmodel. After the theoreticalmodel and analysis of portfolio were calculated and analyzed, we find the following: (i) The statistical properties (i.e., the probability distribution, the variance and loss rate of equity portfolio return) between simulation res...

WAI LEE is the director of research and CIO of the Quantitative Investment Group at Neuberger Berman in New York, NY. [email protected] The global financial crisis in 2008 caused investors to question what went wrong with many of their portfolios, which were believed to be diversified. Mean-variance optimization (MVO), 60/40, modern portfolio theory (MPT), and others seem to have been put on trial...

This paper will investigate the optimum portfolio for an investor, taking into account 5 criteria. The mean variance model of portfolio optimization that was introduced by Markowitz includes two objective functions; these two criteria, risk and return do not encompass all of the information about investment; information like annual dividends, S&P star ranking and return in later years which is ...

The question of optimal portfolio is addressed. The conventional Markowitz portfolio optimisation is discussed and the shortcomings due to non-Gaussian security returns are outlined. A method is proposed to minimise the likelihood of extreme non-Gaussian drawdowns of the portfolio value. The theory is called leptokurtic, because it minimises the effects from ”fat tails” of returns. The leptokur...

The Modern Portfolio Theory of Markowitz maximized portfolio expected return subject to holding total portfolio variance below a selected level. Digital Portfolio Theory is an extension of Modern Portfolio Theory, with the added dimension of memory. Digital Portfolio Theory decomposes the portfolio variance into independent components using the signal processing decomposition of variance. The r...

Harry Markowitz’s mean-variance model for portfolio choice posits a linear relationship between the return of a portfolio and the returns of its component securities. This linear relationship does not hold in an ex post setting when monthly or quarterly returns are used. 1 The Standard Portfolio Selection Model Harry Markowitz begins Mean-Variance Analysis in Portfolio Choice and Capital Market...

In portfolio theory, it is well-known that the distributions of stock returns often have non-Gaussian characteristics. Therefore, we need non-symmetric distributions for modeling and accurate analysis of actuarial data. For this purpose and optimal portfolio selection, we use the Tail Mean-Variance (TMV) model, which focuses on the rare risks but high losses and usually happens in the tail of r...

A Fuzzy Behavioral Portfolio model (FBPM) is proposed for security investment with insufficient market information and uncertain emotion influence on investment return and risk. Based on the general behavioral portfolio theory, trapezoidal fuzzy number is employed to characterize investment return and risk. Text emotion analysis based on emotional lexicons is introduced to obtain the market inv...