Portfolio management with semi-parametric bootstrapping

Estimation risk is an important topic within the area of risk management. Uncertainties regarding parameter estimates carry on to the final statistical product, such as investment strategies, and need to be estimated and accounted for. Unless the exact expressions for the estimators’ variances are k...

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Bibliographic Details
Published in:Journal of risk management in financial institutions 2010-01, Vol.3 (2), p.174-183
Main Authors: Leal, Ricardo Pereira Câmara, Mendes, Beatriz Vaz De Melo
Format: Article
Language:English
Subjects:
Bootstrap
Efficient Frontier
Estimation Risk
Portfolio Management
Resampling
Online Access:Get full text
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Summary:Estimation risk is an important topic within the area of risk management. Uncertainties regarding parameter estimates carry on to the final statistical product, such as investment strategies, and need to be estimated and accounted for. Unless the exact expressions for the estimators’ variances are known, the product’s variability will be assessed through bootstrap techniques. The present paper addresses this issue, proposing a semi-parametric bootstrap method for reproducing the data, a method which parametrically takes care of all marginal characteristics of the returns data, and also takes care of the dependence structure existing in the data, in a very simple and clever non-parametric way. The technique is applied to the problem of assessing the variability of the Markowitz-efficient frontier. Simulation experiments are conducted to assess the out-of-sample forecasting usefulness of the semi-parametric bootstrap methodology.
ISSN:1752-8887
1752-8895
1752-8895
DOI:10.69554/RJAE4121