| Abstract : | The specific thesis aims at providing useful information in portfolio management and contributes to the conclusion of the best way to create an efficient portfolio. It consists of two parts, a theoretical and empirical. In the theoretical part, basic information, that an investor should take into consideration, is provided. Specifically, there is data about the kind of risks an investor could possibly face and how the risk is measured. In addition, it is vital that we elaborate on International Diversification and to answer the question if it is finally worth going internationally. In the second part, there are specified some empirical results arising from mathematical models. The purpose of such mathematical research is the optimization of a portfolio.On our very first chapter of our theoretical part, we analyze the kinds of risk. There is systematic risk and unsystematic risk. Systematic Risk contains: the Market Risk, the Interest Rate Risk, Purchasing Power and Inflationary Risk and Political or Geographical Risk. Unsystematic risk Is a combination of Liquidity Risk, Credit Risk and Operational Risk. First of all, Markowitz established for the first time in 1952 the modern theory of a portfolio with the theory of the optimization of mean-variance, using the standard deviation to measure the risk. Inspired by Roy, the semi-variance model was also announced. Afterwards, in 1991 Kommo and Yamazaki formulated the mean- absolute deviation model (MAD) as a better approach of the mean variance model for the same purpose. The MAD model is different because it is gamic. In 1996 JP Morgan Bank stated the Value-At-Risk Model (VaR). Furthermore, another model of 2000 is the Conditional Value-At-Risk model (CVaR), elaborated by Rockafellar and Uryassev. This is a more efficient model than VaR as it is more specific. In the end we mention the Expected Shortfalls, a model that focuses on potential losses.In our last chapter of the theoretical part of the project there is an analysis of the international diversification accompanied by the most important models and the explanation of each one. Finally, there is an empirical application of the previously mentioned theory and methodology that leads us to certain results.
The specific thesis aims at providing useful information in portfolio management and contributes to the conclusion of the best way to create an efficient portfolio. It consists of two parts, a theoretical and empirical. In the theoretical part, basic information, that an investor should take into consideration, is provided. Specifically, there is data about the kind of risks an investor could possibly face and how the risk is measured. In addition, it is vital that we elaborate on International Diversification and to answer the question if it is finally worth going internationally. In the second part, there are specified some empirical results arising from mathematical models. The purpose of such mathematical research is the optimization of a portfolio.On our very first chapter of our theoretical part, we analyze the kinds of risk. There is systematic risk and unsystematic risk. Systematic Risk contains: the Market Risk, the Interest Rate Risk, Purchasing Power and Inflationary Risk and Political or Geographical Risk. Unsystematic risk Is a combination of Liquidity Risk, Credit Risk and Operational Risk. First of all, Markowitz established for the first time in 1952 the modern theory of a portfolio with the theory of the optimization of mean-variance, using the standard deviation to measure the risk. Inspired by Roy, the semi-variance model was also announced. Afterwards, in 1991 Kommo and Yamazaki formulated the mean- absolute deviation model (MAD) as a better approach of the mean variance model for the same purpose. The MAD model is different because it is gamic. In 1996 JP Morgan Bank stated the Value-At-Risk Model (VaR). Furthermore, another model of 2000 is the Conditional Value-At-Risk model (CVaR), elaborated by Rockafellar and Uryassev. This is a more efficient model than VaR as it is more specific. In the end we mention the Expected Shortfalls, a model that focuses on potential losses.In our last chapter of the theoretical part of the project there is an analysis of the international diversification accompanied by the most important models and the explanation of each one. Finally, there is an empirical application of the previously mentioned theory and methodology that leads us to certain results.
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