PREDICTING AND DECOMPOSING THE RISK OF DATA-DRIVEN PORTFOLIOS

Sophisticated algorithmic techniques are complementing human judgement across the fund industry. Whatever the type of rebalancing that occurs in the course of a longer horizon, it probably violates ...

Auteur(s) :

Nabil Bouamara

Kris Boudt

Sophisticated algorithmic techniques are complementing human judgement across the fund industry. Whatever the type of rebalancing that occurs in the course of a longer horizon, it probably violates the buy-and-hold assumption. In this article, authors develop the methodology to predict, dissect and interpret the h-day financial risk in data-driven portfolios. Their risk budgeting approach is based on a flexible risk factor model that accommodates the dynamics in portfolio composition directly within the risk factors. Once these factors are defined, they cast portfolio risk measures, such as value-at-risk, into an additive mean-variance-skewness-kurtosis format. The simulation study confirms the gains in accuracy compared to the widespread square-root-of-time rule. Their main empirical findings rely on the two-decade performance of a portfolio insurance investment strategy. Rather than looking at total portfolio risk, they conclude that it is more informative to look inside the portfolio.

Type : Publication EDHEC
Date : le 08/03/2020
Pôle de recherche Finance

A voir également

Nouveau double-diplôme EDHEC & EURECOM : se former à l'internet des objets et au management
Actualités
- 04-08-2020
L’EDHEC Business School et EURECOM, école d’ingénieurs spécialisée en sciences du...
Le Programme Grande Ecole de l’EDHEC en 2020, des classements au top !
Actualités
- 03-08-2020
Retour sur une année très riche en classements français et internationaux pour le...
La Chaire relance son étude Diversité & Carrière - Alumni apportez votre contribution!
Actualités
- 29-07-2020
Parce que nous sommes tous différents, cette étude se propose de dresser un état des...
Nouveau double diplôme EDHEC & MINES ParisTech : se former à la finance durable
Actualités
- 27-07-2020
Faciliter la transition vers une économie à faible émission de carbone nécessite un...