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How effective is the tail mean-variance model in the fund of fund selection? An empirical study using various risk measures

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  • Wang, Qiyu
  • Huang, Wenli
  • Wu, Xin
  • Zhang, Chao

Abstract

In this paper, we study the tail mean-variance (TMV) model, which incorporates variation and tail risks and allocates the capital corresponding to the asset’s risk, by using several risk measures including the Value-at-Risk (VaR) and a non-linear weighted (NLW) risk measures. We also use a 5-fold cross-validation algorithm and carry out empirical investigations. We find out that the VaR-measured TMV fund of fund dominates all the other funds of fund using several Chinese funds and US’ funds.

Suggested Citation

  • Wang, Qiyu & Huang, Wenli & Wu, Xin & Zhang, Chao, 2019. "How effective is the tail mean-variance model in the fund of fund selection? An empirical study using various risk measures," Finance Research Letters, Elsevier, vol. 29(C), pages 239-244.
    • Handle: RePEc:eee:finlet:v:29:y:2019:i:c:p:239-244
    DOI: 10.1016/j.frl.2018.08.012
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