The Tail Mean-Variance Model and Extended Efficient Frontier
الموضوعات :
Esmat Jamshidi Eini
1
(Department of Systems and Control, K.N. Toosi University of Technology, Tehran, Iran)
Hamid Khaloozadeh
2
(Department of Systems and Control, K.N. Toosi University of Technology, Tehran, Iran)
الکلمات المفتاحية: Skew-Elliptical Distributions, Tail Mean-Variance criterion, Optimal portfolio selection, Efficient Frontier,
ملخص المقالة :
In portfolio theory, it is well-known that the distributions of stock returns often have non-Gaussian characteristics. Therefore, we need non-symmetric distributions for modeling and accurate analysis of actuarial data. For this purpose and optimal portfolio selection, we use the Tail Mean-Variance (TMV) model, which focuses on the rare risks but high losses and usually happens in the tail of return distribution. The proposed TMV model is based on two risk measures the Tail Condition Expectation (TCE) and Tail Variance (TV) under Generalized Skew-Elliptical (GSE) distribution. We first apply a convex optimization approach and obtain an explicit and easy solution for the TMV optimization problem, and then derive the TMV efficient frontier. Finally, we provide a practical example of implementing a TMV optimal portfolio selection in the Tehran Stock Exchange and show TCE-TV efficient frontier.
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