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CLC number: F833.5

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Received: 2005-04-13

Revision Accepted: 2005-06-27

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Journal of Zhejiang University SCIENCE A 2005 Vol.6 No.100 P.163~171

http://doi.org/10.1631/jzus.2005.AS0163


A dynamic decision model for portfolio investment and assets management


Author(s):  QIAN Edward Y., FENG Ying, HIGGISION James

Affiliation(s):  Center for Private Economy Research, Zhejiang University, Hangzhou 310027, China; more

Corresponding email(s):   yanminqian_ca@yahoo.com.cn, hanqi_feng@msn.com

Key Words:  Portfolio investment, Value-at-Risk (VaR), Generalized Sharpe&rsquo, s rule


QIAN Edward Y., FENG Ying, HIGGISION James. A dynamic decision model for portfolio investment and assets management[J]. Journal of Zhejiang University Science A, 2005, 6(100): 163~171.

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Abstract: 
This paper addresses a dynamic portfolio investment problem. It discusses how we can dynamically choose candidate assets, achieve the possible maximum revenue and reduce the risk to the minimum level. The paper generalizes Markowitz’s portfolio selection theory and Sharpe’s rule for investment decision. An analytical solution is presented to show how an institutional or individual investor can combine Markowitz’s portfolio selection theory, generalized Sharpe&rsquo;s rule and value-at-Risk (VaR) to find candidate assets and optimal level of position sizes for investment (dis-investment). The result shows that the generalized Markowitz’s portfolio selection theory and generalized Sharpe&rsquo;s rule improve decision making for investment.

Darkslateblue:Affiliate; Royal Blue:Author; Turquoise:Article

Reference

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[8] Ho, T.S.Y., Chen, M.Z.H., Eng, F.H.T., 1996. VaR analytics: portfolio structure, key rate convexities, and VaR betas A new approach to determining the VaR of a portfolio. The Journal of Portfolio Management, 23:89-98.

[9] Johansson, F., Sieler, M.J., Tjarberg, M., 1999. Measuring downside portfolio risk. The Journal of Finance of Portfolio Management, 26(1):96-107.

[10] Litterman, R., 1996. Hot SportsTM and hedges. Journal of Portfolio Management, Special Issue:52-75.

[11] Linsmeier, T.J., Pearson, N.D., 1996. Risk Measurement: An Introduction to Value-at-Risk. Working Paper, University of Illinois at Urban-Champaign.

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[13] Markowitz, H.M., 1952. Portfolio selection. The Journal of Finance, VII(1):77-91.

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[17] Wilcox, J., 2001. Better dynamic hedging. The Journal of Risk Finance, 2:5-15.

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