E3 Journal of Business Management and Economics
E3 Journal of Business Management and Economics Vol. 3 (1) pp. 044-047, January 2012; © E3 Journals; ISSN 2141-7482
The optimal portfolio model based on multivariate t distribution with linear weighted sum method
Xing Yu *Department of Mathematics and Applied Mathematics Humanities and Science and Technology Institute of Hunan Loudi, 417000, P.R. China
*Corresponding Author E-mail: hnldyu@sina.com
Accepted 3 December 2011
Abstract
This paper proposed the optimal portfolio model maximizing returns and minimizing the risk expressed as CvaR under the assumption that the portfolio yield is subject to the multivariate t distribution. With linear weighted sum method, we solved the multi-objectives model, and compared the model results to the case under the assumption of normal distribution return, based on the portfolio VAR through empirical research. It is showed that our max return equals to and risk is higher than M-V model. It shows that CVaR predicts the potential risk of the portfolio, which is helpful for investor’s cautious investment.
Keywords: Multivariate t distribution; The optimal portfolio; CVAR; Multi- objectives programming; Linear weighted sum method
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