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Cambridge Finance Seminar - Woo Chang Kim

When May 08, 2014
from 05:00 PM to 06:00 PM
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Cambridge Finance Seminar

 

Thursday May 8 2014

Barbara White Room, Newnham College

5-6pm

  

Woo Chang Kim

Assistant Professor,

ISysE, KAIST Visiting Fellow, ORFE, Princeton University

 

Understanding Robust Portfolios

Abstract

Robust portfolio optimization has been developed to resolve the high sensitivity to inputs of the

Markowitz mean-variance model. The main idea is to introduce an uncertainty set for the model

parameters, and to obtain the portfolio with worst-case optimization approach. Although much effort has

been put into forming robust portfolios, there have not been many attempts to analyze the characteristics

of portfolios formed from robust optimization. In this presentation, we discuss the recent finding on the

qualitative characteristics of the robust portfolios. More specifically, there are three main questions to be

addressed:

1) Is robust portfolio really robust?

2) Robust portfolio is different from traditional mean-variance portfolio. Is there any consistent

pattern in regard to this qualitative difference in two portfolios?

3) If robust portfolio is consistently different from traditional mean-variance portfolio, is it possible

to reduce the difference without losing the robustness?

References

[1] Kim, Woo Chang, Jang Ho Kim, and Frank J. Fabozzi (2014) “Deciphering Robust Portfolios”,

Journal of Banking and Finance, under minor revision

[2] Kim, Woo Chang, Frank J. Fabozzi, Patrick Cheridito, and Charles Fox (2014) “Controlling Portfolio

Skewness and Kurtosis without Directly Optimizing Third and Fourth Moments”, Economics Letters,

122, 154-158

[3] Kim, Woo Chang, Min Jeong Kim, Jang Ho Kim, and Frank J. Fabozzi (2014) “Robust Portfolios

That Do Not Tilt Factor Exposure”, European Journal of Operational Research, Available Online, DOI:

10.1016/j.ejor.2013.03.029

[4] Kim, Jang Ho, Woo Chang Kim, and Frank J. Fabozzi (2013) “Composition of Robust Equity

Portfolios”, Finance Research Letters, 10, 72-81

[5] Kim, Woo Chang, Jang Ho Kim, So Hyung Ahn, and Frank J. Fabozzi

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