The Resampled Method To Improve The Efficient Frontier In Minimizing Estimation Error: The Case Of Malaysia Equity Portfolios

Since the work of Markowitz (1952), Mean-Variance (MV) analysis has been a central focus of financial economics. MV theory is still used as a foundation of the modern finance for asset management. Problems involving quadratic objective functions or loss functions generally incorporate a MV analys...

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Main Author:	Abu Mansor, Siti Nurleena
Format:	Thesis
Language:	English
Published:	2006
Subjects:	QA1 Mathematics (General)
Online Access:	http://eprints.usm.my/31211/1/SITI__NURLEENA_BINTI_ABU_MANSOR.pdf
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id	my-usm-ep.31211
record_format	uketd_dc
spelling	my-usm-ep.312112016-11-28T08:17:26Z The Resampled Method To Improve The Efficient Frontier In Minimizing Estimation Error: The Case Of Malaysia Equity Portfolios 2006-08 Abu Mansor, Siti Nurleena QA1 Mathematics (General) Since the work of Markowitz (1952), Mean-Variance (MV) analysis has been a central focus of financial economics. MV theory is still used as a foundation of the modern finance for asset management. Problems involving quadratic objective functions or loss functions generally incorporate a MV analysis. However, estimation error is known to have huge impact on MV optimized portfolios, which is one of the primary reasons to make standard Markowitz optimization unfeasible in practice. Therefore, in this study we improved the efficient frontier using a relatively new approach introduced by Michaud (1998), i.e., the resampled efficient. Michaud argues that the limitations of MV effiCiency in practice generally derive from a lack of statistical understanding of MV optimization. We support his statistical view of MV optimization that leads to new procedures which can reduce estimation error. Bermula dengan hasil kerja Markowitz (1952), analisis "Mean-Variance" (MV) telah menjadi fokus utama dalam analisis ekonomi kewangan. Kini, teori MV digunakan sebagai asas dalam bidang kewangan moden bagi pengurusan asset. Permasalahan yang melibatkan fungsi objektif kuadratik atau fungsi menyusut, secara amnya turut menggabungkan penggunaan ailalisis MV. Namun, ralat penganggaran memberi impak yang besar terhadap potfo!io yang telah dioptimumkan oleh analisis MV, di mana ia merupakan salah satu sebab utama menjadikan piawai pengoptimuman Markowitz tidak lagi dapat digunakan secara praktikal. Oleh itu, kajian ini memperbalki sempadan cekap menggunakan pendekatan baru yang diperkenalkan oleh Michaud (1998) iaitu pensampelan-semula cekap. Michaud membantah penggunaan kaedah MV kerana secara praktikal batasan "MV efficiency" wujud disebabkan oleh kurangnya pemahaman statistik daripada proses pengoptimuman MV. Kita turut menyokong pandangannya yang seterusnya menjurus ke arah satu kaedah baru yang boleh mengurangkan kesan ralat penganggaran. 2006-08 Thesis http://eprints.usm.my/31211/ http://eprints.usm.my/31211/1/SITI__NURLEENA_BINTI_ABU_MANSOR.pdf application/pdf en public masters Universiti Sains Malaysia Pusat Pengajian Sains Matematik
institution	Universiti Sains Malaysia
collection	USM Institutional Repository
language	English
topic	QA1 Mathematics (General)
spellingShingle	QA1 Mathematics (General) Abu Mansor, Siti Nurleena The Resampled Method To Improve The Efficient Frontier In Minimizing Estimation Error: The Case Of Malaysia Equity Portfolios
description	Since the work of Markowitz (1952), Mean-Variance (MV) analysis has been a central focus of financial economics. MV theory is still used as a foundation of the modern finance for asset management. Problems involving quadratic objective functions or loss functions generally incorporate a MV analysis. However, estimation error is known to have huge impact on MV optimized portfolios, which is one of the primary reasons to make standard Markowitz optimization unfeasible in practice. Therefore, in this study we improved the efficient frontier using a relatively new approach introduced by Michaud (1998), i.e., the resampled efficient. Michaud argues that the limitations of MV effiCiency in practice generally derive from a lack of statistical understanding of MV optimization. We support his statistical view of MV optimization that leads to new procedures which can reduce estimation error. Bermula dengan hasil kerja Markowitz (1952), analisis "Mean-Variance" (MV) telah menjadi fokus utama dalam analisis ekonomi kewangan. Kini, teori MV digunakan sebagai asas dalam bidang kewangan moden bagi pengurusan asset. Permasalahan yang melibatkan fungsi objektif kuadratik atau fungsi menyusut, secara amnya turut menggabungkan penggunaan ailalisis MV. Namun, ralat penganggaran memberi impak yang besar terhadap potfo!io yang telah dioptimumkan oleh analisis MV, di mana ia merupakan salah satu sebab utama menjadikan piawai pengoptimuman Markowitz tidak lagi dapat digunakan secara praktikal. Oleh itu, kajian ini memperbalki sempadan cekap menggunakan pendekatan baru yang diperkenalkan oleh Michaud (1998) iaitu pensampelan-semula cekap. Michaud membantah penggunaan kaedah MV kerana secara praktikal batasan "MV efficiency" wujud disebabkan oleh kurangnya pemahaman statistik daripada proses pengoptimuman MV. Kita turut menyokong pandangannya yang seterusnya menjurus ke arah satu kaedah baru yang boleh mengurangkan kesan ralat penganggaran.
format	Thesis
qualification_level	Master's degree
author	Abu Mansor, Siti Nurleena
author_facet	Abu Mansor, Siti Nurleena
author_sort	Abu Mansor, Siti Nurleena
title	The Resampled Method To Improve The Efficient Frontier In Minimizing Estimation Error: The Case Of Malaysia Equity Portfolios
title_short	The Resampled Method To Improve The Efficient Frontier In Minimizing Estimation Error: The Case Of Malaysia Equity Portfolios
title_full	The Resampled Method To Improve The Efficient Frontier In Minimizing Estimation Error: The Case Of Malaysia Equity Portfolios
title_fullStr	The Resampled Method To Improve The Efficient Frontier In Minimizing Estimation Error: The Case Of Malaysia Equity Portfolios
title_full_unstemmed	The Resampled Method To Improve The Efficient Frontier In Minimizing Estimation Error: The Case Of Malaysia Equity Portfolios
title_sort	resampled method to improve the efficient frontier in minimizing estimation error: the case of malaysia equity portfolios
granting_institution	Universiti Sains Malaysia
granting_department	Pusat Pengajian Sains Matematik
publishDate	2006
url	http://eprints.usm.my/31211/1/SITI__NURLEENA_BINTI_ABU_MANSOR.pdf
_version_	1747820404364279808

The Resampled Method To Improve The Efficient Frontier In Minimizing Estimation Error: The Case Of Malaysia Equity Portfolios

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