Multivariate Dependence Risk and Portfolio Optimization: An Application to Mining Stock Portfolios

Posted: 30 May 2016

See all articles by Stelios Bekiros

Stelios Bekiros

European University Institute - Economics Department (ECO); IPAG Business School; Athens University of Economics and Business; University of Bologna - Rimini Center for Economic Analysis (RCEA)

José Arreola Hernández

Tecnologico de Monterrey (ITESM)

Shawkat M. Hammoudeh

Montpellier Business School; Drexel University - Lebow College of Business

Duc Khuong Nguyen

IPAG Business School

Date Written: July 20, 2015

Abstract

This study proposes an integrated framework to model and estimate relatively large dependence matrices using pair vine copulas and minimum risk optimal portfolios with respect to five risk measures within the context of the global financial crisis. We apply this methodology to two 20-asset mining (gold and iron ore-nickel) sector portfolios from the Australian Securities Exchange. The pair vine copulas prove to be powerful tools for the modeling of changing dependence risk under three different period scenarios combined with the optimization of portfolios that have complex patterns of dependence. The portfolio optimization results converge, on average, in some stocks.

Keywords: Mining stocks, Vine copulas, Risk measures, Tail dependence, Portfolio optimization

Suggested Citation

Bekiros, Stelios and Arreola Hernández, José and Hammoudeh, Shawkat M. and Nguyen, Duc Khuong, Multivariate Dependence Risk and Portfolio Optimization: An Application to Mining Stock Portfolios (July 20, 2015). Resources Policy 46 (2015) 1–11. Available at SSRN: https://ssrn.com/abstract=2786209 or http://dx.doi.org/10.2139/ssrn.2786209

Stelios Bekiros

European University Institute - Economics Department (ECO) ( email )

Villa San Paolo
Via della Piazzuola 43
50133 Florence
Italy

IPAG Business School ( email )

184 BD Saint Germain
Paris, 75006
France

Athens University of Economics and Business ( email )

76 Patission Street
Athens, 104 34
Greece

University of Bologna - Rimini Center for Economic Analysis (RCEA) ( email )

Via Patara, 3
Rimini (RN), RN 47900
Italy

José Arreola Hernández (Contact Author)

Tecnologico de Monterrey (ITESM) ( email )

Av. Montaña Monarca 1340
Jesus de Monte
Morelia, Michoacan 58350
Mexico
3751190846 (Phone)

HOME PAGE: http://https://mx.linkedin.com/in/jose-arreola-hernandez-0a7273105

Shawkat M. Hammoudeh

Montpellier Business School ( email )

2300 Avenue des Moulins
Montpellier, 34080
France

Drexel University - Lebow College of Business ( email )

3141 Chestnut Street
Philadelphia, PA 19104
United States
2158956673 (Phone)
2158956975 (Fax)

HOME PAGE: http://faculty.lebow.drexel.edu/HammoudehS/

Duc Khuong Nguyen

IPAG Business School ( email )

184 BD Saint Germain
Paris, 75006
France

HOME PAGE: http://www.ipag.fr/en/

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