Mean-Coherent Risk and Mean-Variance Approaches in Portfolio Selection: An Empirical Comparison

S.Y. Polbennikov, B. Melenberg

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Abstract

We empirically analyze the implementation of coherent risk measures in portfolio selection.First, we compare optimal portfolios obtained through mean-coherent risk optimization with corresponding mean-variance portfolios.We find that, even for a typical portfolio of equities, the outcomes can be statistically and economically different.Furthermore, we apply spanning tests for the mean-coherent risk efficient frontiers, which we compare to their equivalents in the meanvariance framework.For portfolios of common stocks the outcomes of the spanning tests seem to be statistically the same.
Original languageEnglish
Place of PublicationTilburg
PublisherEconometrics
Number of pages53
Volume2005-100
Publication statusPublished - 2005

Publication series

NameCentER Discussion Paper
Volume2005-100

Keywords

  • portfolio choice
  • mean variance
  • mean coherent risk
  • comparison

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