Abstract
In order to improve upon the performance of a managed portfolio, we propose the use of Marginal Value-at-Risk (MVaR) to ascertain the desirability of assets for inclusion in the managed portfolio, prior to obtaining the optimal managed portfolio. In particular, this is applied on a larger index which comprises of a greater number of assets than a benchmark index and the larger index includes all the assets from the benchmark index. The resulting MVaR index includes exactly the same number of assets as the benchmark index. An empirical study with S&P BSE 100 as the benchmark index, with the MVaR index being derived from S&P BSE 200, with five different optimization problems shows outperformance by the MVaR portfolio over the benchmark portfolio. This highlights the advantage of the inclusion of MVaR resulting in improved performance of the managed portfolio.
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The authors express their gratitude to both the reviewers for their detailed comments which resulted in an improved manuscript.
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Jain, S., Chakrabarty, S.P. Does Marginal VaR Lead to Improved Performance of Managed Portfolios: A Study of S&P BSE 100 and S&P BSE 200. Asia-Pac Financ Markets 27, 291–323 (2020). https://doi.org/10.1007/s10690-019-09294-0
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DOI: https://doi.org/10.1007/s10690-019-09294-0