Z. Liu, B. Song, and W. Li (PRC)
Measuring; fat tail distribution; extreme value dependence; copula; portfolio selection; performance evaluation
Firstly, the drawbacks of Markowitz’s portfolio selection theory, the actual distribution and the dependence of financial asset returns are analyzed in this paper, then based on the character of copula, a multivariate distribution function which can reflect the actual distribution and the dependence of financial asset returns is developed. Finally, on the assumption of investor’s CRRA utility function, using the developed multivariate distributions and the data from China security market, empirical research is done on the performance of the portfolio selection by dynamic backing test in order to research the effect of measuring the actual distribution and dependence on portfolio selection.
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