Robust portfolio planning in the presence of market anomalies

Oguzsoy C. B., Guven S.

OMEGA-INTERNATIONAL JOURNAL OF MANAGEMENT SCIENCE, cilt.35, sa.1, ss.1-6, 2007 (SCI-Expanded) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 35 Sayı: 1
  • Basım Tarihi: 2007
  • Doi Numarası: 10.1016/j.omega.2005.01.020
  • Dergi Adı: OMEGA-INTERNATIONAL JOURNAL OF MANAGEMENT SCIENCE
  • Derginin Tarandığı İndeksler: Science Citation Index Expanded (SCI-EXPANDED), Social Sciences Citation Index (SSCI), Scopus
  • Sayfa Sayıları: ss.1-6
  • Anahtar Kelimeler: portfolio selection, risk, robust optimization, market anomalies, stochastic programming, STOCK RETURNS, CONTRARIAN INVESTMENT, OPTIMIZATION, RISK
  • Orta Doğu Teknik Üniversitesi Adresli: Hayır

Özet

In this study, a short-term portfolio modeling formulation is developed using existing anomalies as a single determinant for daily Istanbul Stock Exchange National 100 Composite Index (ISE) and US dollars (USD) returns in a Robust optimization (RO) framework. Using anomalies in planning within an RO framework establishes a balance between risk seeking and risk averse behaviors, as generating profit from anomalies is risky and RO enables to settle down the extreme risk seeking behavior. Applications of the model using various data sets result in real profit generation such that terminal wealth figures increase considerably more than Wholesale Price Index (WPI). This study demonstrates that RO is a viable approach to make use of anomaly information for short-term profits. (c) 2005 Published by Elsevier Ltd.