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An analysis of mean-variance portfolio selection with varying holding periods

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Abstract:

In this study, I investigate optimal holding period (investment horizon) for the classical mean-variance portfolio optimization problem. Optimal holding period ex-post is determined using Istanbul Stock Exchange ISE-100 index stocks and Athens Stock Exchange FTSE-40 index stocks data. I extend the approach to other downside risk criteria including expected loss and semi-variance. The analysis involves solving the portfolio optimization problem for a total of 648 cases - two stock exchanges, three different target return levels, three different risk measures and 36 different time periods with rolling data. I discuss the results from the view point of two neighbouring markets: one with an upward trend and the other with a downward trend. The results show that portfolio returns with varying holding periods have a convex structure with an optimal holding period.

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036840600606310

Affiliations: Department of Business Administration, Beytepe Campus, Hacettepe University, 06532 Ankara, Turkey

Publication date: June 1, 2007

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