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 JAMP  Vol.3 No.7 , July 2015
Application of Volatility in Portfolio Construction
Michael Ha1, George Z. Liu2, Lihui Zheng3
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Abstract: We studied the CBOE Market Volatility Index from 1995 to 2004 and the Cross-Sectional Volatility of MSCI US and MSCI AC Asia ex Japan of the same period. Tracking Error calculations and Market Volatility Analyses were performed. We selected a portfolio, Dragon, for Risk Analysis, Risk Decomposition and Risk Characteristics identification purposes. A conclusion relating Dragon’s Tracking Error and its Portfolio Size was drawn.
Keywords: Volatility, VIX, Tracking Error, Active Risk, Risk Decomposition, Risk Characteristics
Cite this paper: Ha, M. , Liu, G. and Zheng, L. (2015) Application of Volatility in Portfolio Construction. Journal of Applied Mathematics and Physics, 3, 808-813. doi: 10.4236/jamp.2015.37099.
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