Portfolio Selection in a Multi-Input Multi-Output Setting: a Simple Monte-Carlo-FDH Algorithm

Nalpas, Nicolas, Simar, Léopold and Vanhems, Anne (2016) Portfolio Selection in a Multi-Input Multi-Output Setting: a Simple Monte-Carlo-FDH Algorithm. TSE Working Paper, n. 16-648, Toulouse

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Official URL: http://tse-fr.eu/pub/30474


This paper proposes a nonparametric efficiency measurement approach for the static portfo- lio selection problem in a general inputs-outputs space, where inputs can include variance and kurtosis and outputs can include mean and skewness. Our work is in the vein of Briec, Kerstens and Jokung (2007) and Jurzenko, Maillet and Merlin (2006) who develop a directional dis- tance (shortage function) approach to evaluate the performance of portfolios in Mean-Variance- Skewness and in Mean-Variance-Skewness-Kurtosis spaces. Our approach use the Free Disposal Hull (FDH) estimator to derive an algorithm avoiding the heavy and non-robust numerical op- timization approaches suggested so far. This new approach is much faster, more robust to reach the optimum and more exible since it can be extended to more general situations. We illustrate the algorithm with a data set on the French CAC 40 already used in the literature, to compare our method with the numerical optimization approaches.

Item Type: Monograph (Working Paper)
Language: English
Date: May 2016
Place of Publication: Toulouse
Uncontrolled Keywords: Directional Distance function, FDH estimator, Efficient frontier, Portfolio performance
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 31 May 2016 10:20
Last Modified: 21 Mar 2018 13:56
OAI ID: oai:tse-fr.eu:30474
URI: http://publications.ut-capitole.fr/id/eprint/21978

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