A COMPARISON OF OPTIMAL PORTFOLIO PERFORMANCES OF THREE OPTIMIZATION METHODS

Öz

This study compares performances of three portfolios established based on Markowitz optimization, shrinkage optimization, and Black- Litterman optimization. BIST30 companies are used to test the results. Markowitz optimization is unrestricted, thus generates the highest possible utility. However, portfolio weights display high values of short- selling needs. Shrinkage optimization restricts short selling needs gradually, but it does not block short- selling. On the other hand, Black- Litterman model totally prohibits short- selling. Results show that the lowest utility is originated by Black- Litterman model. Shrinkage model generates average returns and less- than- average risk. Therefore, shrinkage ratio is a strong candidate for future portfolio building. The results also suggest that short selling should be included in portfolio activities to maximize performance. Short- selling improves portfolio performance significantly

Anahtar Kelimeler

• Optimization techniques
• portfolio choice
• investment decision

Kaynakça

1. Ayan, Tuba Yakıcı and Akay, Ali, (2013), Tahmine Dayali Portfoy Optimizasyonu: Modern Portfoy Teorisinde Risk ve Beklenen Getiri Kavramlarina Alternatif Bir Yaklaşim, Dumlupınar Universitesi Sosyal Bilimler Dergisi EYI 2013 Ozel Sayisi.
2. Benninga, Simon, (2008), Financial Modeling, 3rd Ed., MIT Press.
3. Beach, Steven and Orlov, Alexei, (2007), An Application of the Black-Litterman Model with EGARCH-M-Derived views for International Portfolio Management, Financial Markets Portfolio Management, 21(2), 141-166. Bengtsson C. and Holst, J., (2002), “On Portfolo Selection: Improved Covariance Matrix Estimation for Swedish Asset Returns”, Working Paper, Lund University and Lund Institute of Technology.
4. Bertsimas, Dimitris, Gupta, Vishal and Kallus, Nathan, (2013), Data- Driven Robust Optimization. Retrieved from http://www.nathankallus.com/DataDrivenRobOptv1.pdf.