Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/318728 
Year of Publication: 
2020
Citation: 
[Journal:] Business Systems Research (BSR) [ISSN:] 1847-9375 [Volume:] 11 [Issue:] 2 [Year:] 2020 [Pages:] 73-85
Publisher: 
Sciendo, Warsaw
Abstract: 
Background: In the portfolio optimization area, most of the research is focused on insample portfolio optimization. One may ask a rational question of what the efficiency of the portfolio optimization strategy is and how to measure it. Objectives: The objective of the paper is to propose the approach to measuring the efficiency of the portfolio strategy based on the hypothesis inference methodology and considering a possible data snooping bias. The proposed approach is demonstrated on the Markowitz minimum variance model and the fuzzy probabilities minimum variance model. Methods/Approach: The proposed approach is based on a statistical test. The null hypothesis is that the analysed portfolio optimization strategy creates a portfolio randomly, while the alternative hypothesis is that an optimized portfolio is created in such a way that the risk of the portfolio is lowered. Results: It is found out that the analysed strategies indeed lower the risk of the portfolio during the market's decline in the global financial crisis and in 94% of the time in the 2009-2019 period. Conclusions: The analysed strategies lower the risk of the portfolio in the out-of-sample period.
Subjects: 
data snooping bias
financial crisis
hypothesis test
minimum-risk portfolio
portfolio optimization
JEL: 
G11
G17
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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