Yilmaz, Tolgahan (2010): Improving Portfolio Optimization by DCC And DECO GARCH: Evidence from Istanbul Stock Exchange.
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In this paper, the performance of global minimum variance (GMV) portfolios constructed by DCC and DECO-GARCH are compared to that of GMV portfolios constructed by sample covariance and constant correlation methods in terms of reduced volatility. Also, the performance of GMV portfolios are tested against that of equally weighted and cap weighted portfolios. Portfolios are constructed from the stocks listed in Istanbul Stock Exchange 30 index (hereafter, ISE-30). The results show that GMV portfolios constructed by DCC-GARCH outperformed the other portfolios. In addition, the performance of GMV portfolios estimated by DCC and DECO-GARCH methods are improved by extending calibration period from three years to four years and lowering rolling window term from one week to one day, while the performances of other GMV portfolios decrease. It shows the effect of time varying variance and dynamic correlations on portfolio optimization at Turkish stock market.
|Item Type:||MPRA Paper|
|Original Title:||Improving Portfolio Optimization by DCC And DECO GARCH: Evidence from Istanbul Stock Exchange|
|Keywords:||DCC-GARCH; DECO-GARCH; GMV portfolio|
|Subjects:||C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models
C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation
G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions
C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C61 - Optimization Techniques ; Programming Models ; Dynamic Analysis
|Depositing User:||Tolgahan YILMAZ|
|Date Deposited:||11. Dec 2010 01:21|
|Last Modified:||28. Feb 2013 05:54|
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