On the performance of the minimum VaR portfolio

Alexander and Baptista [2002. Economic implications of using a mean-value-at-risk (VaR) model for portfolio selection: A comparison with mean-variance analysis. Journal of Economic Dynamics and Control 26: 1159-93] develop the concept of mean-VaR efficiency for portfolios and demonstrate its very cl...

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Bibliographic Details
Published in:The European journal of finance 2011-08, Vol.17 (7), p.553-576
Main Authors: Durand, Robert B., Gould, John, Maller, Ross
Format: Article
Language:English
Subjects:
Efficiency
Fama-French portfolios
Financial models
Investment planning
Investment returns
Investment strategies
iShares
mean-variance efficiency
Portfolio management
portfolio optimization
Portfolio performance
Rates of return
Risk assessment
Risk management
Studies
value-at-risk
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Summary:Alexander and Baptista [2002. Economic implications of using a mean-value-at-risk (VaR) model for portfolio selection: A comparison with mean-variance analysis. Journal of Economic Dynamics and Control 26: 1159-93] develop the concept of mean-VaR efficiency for portfolios and demonstrate its very close connection with mean-variance efficiency. In particular, they identify the minimum VaR portfolio as a special type of mean-variance efficient portfolio. Our empirical analysis finds that, for commonly used VaR breach probabilities, minimum VaR portfolios yield ex post returns that conform well with the specified VaR breach probabilities and with return/risk expectations. These results provide a considerable extension of evidence supporting the empirical validity and tractability of the mean-VaR efficiency concept.
ISSN:1351-847X
1466-4364
DOI:10.1080/1351847X.2010.495484