Portfolio optimization under mean-CVaR simulation with copulas on the Vietnamese stock exchange

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This paper studies how to construct and compare various optimal portfolio frameworks for investors in the context of the Vietnamese stock market. The aim of the study is to help investors to find solutions for constructing an optimal portfolio strategy using modern investment frameworks in the Vietnamese stock market. The study contains a census of the top 43 companies listed on the Ho Chi Minh stock exchange (HOSE) over the ten-year period from July 2010 to January 2021. Optimal portfolios are constructed using Mean-Variance Framework, Mean-CVaR Framework under different copula simulations. Two-thirds of the data from 26/03/2014 to 27/1/2021 consists of the data of Vietnamese stocks during the COVID-19 recession, which caused depression globally; however, the results obtained during this period still provide a consistent outcome with the results for other periods. Furthermore, by randomly attempting different stocks in the research sample, the results also perform the same outcome as previous analyses. At about the same CvaR level of about 2.1%, for example, the Gaussian copula portfolio has daily Mean Return of 0.121%, the t copula portfolio has 0.12% Mean Return, while Mean-CvaR with the Raw Return portfolio has a lower Return at 0.103%, and the last portfolio of Mean-Variance with Raw Return has 0.102% Mean Return. Empirical results for all 10 portfolio levels showed that CVaR copula simulations significantly outperform the historical Mean-CVaR framework and Mean-Variance framework in the context of the Vietnamese stock exchange.

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    • Figure 1. Mean-CVaR efficient frontiers with the 95% CVaR
    • Figure 2. Mean-CVaR efficient frontiers with 95% CVaR (6.5-year duration)
    • Figure 3. Mean-CVaR efficient frontiers with 95% CVaR (23 random stocks)
    • Figure 4. Mean-CVaR efficient frontiers with the 99% CVaR
    • Figure 5. Mean-CVaR efficient frontiers with 99% CVaR (6.5-year duration)
    • Figure 6. Mean-CVaR efficient frontiers with 99% CVaR (23 random stocks)
    • Table 1. Mean returns and 95% CVaR of 10 portfolios in each case
    • Table 2. Mean returns and 95% CVaR of 10 portfolios in each case (6.5-year duration)
    • Table 3. Mean returns and 95% CVaR of 10 portfolios in each case (23 random stocks)
    • Table 4. Mean returns and 99% CVaR of 10 portfolios in each case
    • Table 5. Mean returns and 99% CVaR of 10 portfolios in each case (6.5-year duration)
    • Table 6. Mean returns and 99% CVaR of 10 portfolios in each case (23 random stocks)
    • Conceptualization
      Le Tuan Anh, Dao Thi Thanh Binh
    • Data curation
      Le Tuan Anh
    • Formal Analysis
      Le Tuan Anh
    • Investigation
      Le Tuan Anh, Dao Thi Thanh Binh
    • Methodology
      Le Tuan Anh, Dao Thi Thanh Binh
    • Project administration
      Le Tuan Anh
    • Resources
      Le Tuan Anh
    • Software
      Le Tuan Anh
    • Validation
      Le Tuan Anh, Dao Thi Thanh Binh
    • Visualization
      Le Tuan Anh
    • Writing – original draft
      Le Tuan Anh
    • Writing – review & editing
      Le Tuan Anh, Dao Thi Thanh Binh
    • Supervision
      Dao Thi Thanh Binh