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|Title:||Can switching between risk measures lead to better portfolio optimization?|
|Citation:||The Journal of Asset Management, 2010; 10(6):358-369|
|Publisher:||Palgrave Macmillan Ltd.|
|Brianna Cain and Ralf Zurbruegg|
|Abstract:||This article proposes a technique that involves switching between risk measures in different market environments, to capture the well-documented dynamic nature of risk within a portfolio optimization setting. In-sample results show categorically that switching between various measures, such as CVaR, time-varying (GARCH) variances and simple standard deviations, can lead to a better performance than using any single measure. Using a logistic probability model to determine when to switch between alternatives, out-of -sample results also show positive results. Given that this study only applies a basic switching system, it lends itself to easy application by practitioners through its simplicity, intuitive appeal and computational feasibility.|
|Keywords:||volatility; variance; CvaR; GARCH; model switching; portfolio allocation|
|Rights:||© 2010 Macmillan Publishers Ltd.|
|Appears in Collections:||Business School publications|
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