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João Caldeira, Guilherme Moura and André A.P. Santos
''Portfolio optimization using a parsimonious multivariate GARCH model: application to the Brazilian stock market''
( 2012, Vol. 32 No.3 )
We apply a parsimonious multivariate GARCH speci cation based on the Fama-French-Carhart factor model to generate high-dimensional conditional covariance matrices and to obtain shortselling-constrained and unconstrained minimum variance portfolios. An application involving 61 stocks traded on the S~ao Paulo stock exchange (BM&FBovespa) shows that the proposed speci cation delivers less risky portfolios on an out-of-sample basis in comparison to several benchmark models, including existing factor approaches.
Keywords: portfolio optimization, forecasting, performance evaluation, Sharpe ratio
C5 - Econometric Modeling: General
Manuscript Received : Apr 09 2012 Manuscript Accepted : Jul 03 2012

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