Mean-coherent risk and mean-variance approaches in portfolio selection: an empirical comparison

We empirically analyze the implementation of coherent risk measures in portfolio selection. First, we compare optimal portfolios obtained through mean-coherent risk optimization with corresponding mean-variance portfolios. We find that, even for a typical portfolioof equities, the outcomes can be statistically and economically different. Furthermore, we apply spanning tests for the mean-coherent risk efficient frontiers, which we compare to their equivalents in the mean-variance framework. For portfolios of common stocks the outcomes of the spanning tests seem to be statistically the same.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.

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