Intradaily dynamic portfolio selection

Bauwens, Luc;Ben Omrane, Walid;Rengifo, Erick
(2010) Computational Statistics & Data Analysis — Vol. 54, n° 11, p. 2400-2418 (2010)

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Authors
  • Bauwens, Lucorcid-logoUCLouvain
    Author
  • Ben Omrane, Walid
    Author
  • Rengifo, Erick
    Author
Abstract
A portfolio selection model which allocates a portfolio of currencies by maximizing the expected return subject to Value-at-Risk (VaR) constraint is designed and implemented. Based on an econometric implementation using intradaily data, the optimal portfolio allocation is forecasted at regular time intervals. For the estimation of the conditional variance from which the VaR is computed, univariate and multivariate GARCH models are used. Model evaluation is done using two economic criteria and two statistical tests. The result for each model is given by the best forecasted intradaily investment recommendations in terms of the optimal weights of the currencies in the risky portfolio. The results show that estimating the VaR from multivariate GARCH models improves the results of the forecasted optimal portfolio allocation, compared to using a univariate model. (C) 2009 Elsevier B.V. All rights reserved.
Affiliations
  • Institution iconUCLouvainSSH/IMAQ - Institut multidisciplinaire pour la modélisation et l'analyse quantitative

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Bauwens, L., Ben Omrane, W., & Rengifo, E. (2010). Intradaily dynamic portfolio selection. Computational Statistics & Data Analysis, 54(11), 2400-2418. https://doi.org/10.1016/j.csda.2009.05.027 (Original work published 2010)