TAILIEUCHUNG - On some nonlinear dependence structure in portfolio design

These new methods allow us to estimate the density of the portfolio which leads to calculations of some popular risk measurements like the value at risk (VaR) of investment portfolios. As for applications, making use of the listed stocks on the Ho Chi Minh city Stock Exchange (HoSE), some Markowitz optimal portfolios are constructed together with their risk measurements. | TẠP CHÍ PHÁT TRIỂN KHOAJIỌC CÔNG NGHỆ CHUYÊN SAN KINH TẾ - LUẬT VÀ QUẢN LÝ TẬP 2 SỐ 1 2018 91 On some nonlinear dependence structure in portfolio design Nguyen Phuc Son Pham Hoang Uyen Nguyen Dinh Thien Abstract Constructing portfolios with high returns and low risks is always in great demand. Markowitz 1952 utilized correlation coefficients between pairs of stocks to build portfolios satisfying different levels of risk tolerance. The correlation coefficient describes the linear dependence structure between two stocks but cannot capture a lot of nonlinear independence structures. Therefore sometimes portfolio performances are not up to investors expectations. In this paper based on the theory of copula by Sklar see 19 we investigate several new methods to detect nonlinear dependence structures. These new methods allow us to estimate the density of the portfolio which leads to calculations of some popular risk measurements like the value at risk VaR of investment portfolios. As for applications making use of the listed stocks on the Ho Chi Minh city Stock Exchange HoSE some Markowitz optimal portfolios are constructed together with their risk measurements. Apparently with nonlinear dependence structures the risk evaluations of some pairs of stocks have noticeable twists. This in turn may lead to changes of decisions from investors. Keywords Portfolio design data science dependence structure copula risk stocks return measure. 1 INTRODUCTION SINCE the birth of stock exchanges investors have been constantly seeking out optimal portfolios. One of the key characteristics of a good Received 13-10-2017 Accept 11-12-2017 Published 157-2018. Author Nguyen Phuc Son Ho Chi Minh city Institute for Development Studies e-mail sonnp@ . Author Pham Hoang Uyen University of Economics and Law VNUHCM Viet Nam e-mail uyenph@ . Author Nguyen Dinh Thien University of Economics and Law VNUHCM Viet Nam e-mail thiennd@ . portfolio is a reasonably low risk. All

• Hoá học
• On some nonlinear dependence structure in portfolio design
• Dependence structure in portfolio design
• The value at risk
• The Ho Chi Minh city Stock Exchange
• Markowitz optimal portfolios