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Value at Risk and Return from the Use of Bayesian Methods for Stress Testing in a World Asset Allocation and the 2008-2009 Crisis

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  • Humberto Valencia Herrera

    (Instituto Tecnológico y de Estudios Superiores de Monterrey)

Abstract

The return and value at risk return of a proposed asset allocation obtained using Black-Litterman and Markowitz Bayesian portfolio methods applied to a world portfolio of indexes is strongly dependent on the scale parameter of the prior return distribution. However, the observed mean and value at risk during the 2008 to 2010 period with the proposed allocation is relatively less sensible to this parameter

Suggested Citation

  • Humberto Valencia Herrera, 2011. "Value at Risk and Return from the Use of Bayesian Methods for Stress Testing in a World Asset Allocation and the 2008-2009 Crisis," Revista de Administración, Finanzas y Economía (Journal of Management, Finance and Economics), Tecnológico de Monterrey, Campus Ciudad de México, vol. 5(1), pages 33-49.
    • Handle: RePEc:ega:rafega:201103
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Financial studies; international security markets; Black-Litterman model; Bayesian portfolio optimization;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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