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@article{ART002623753},
author={Cheoljun Eom},
title={Improvement of Optimal Portfolio using Correlation Matrix},
journal={Journal of Insurance and Finance},
issn={2384-3209},
year={2020},
volume={31},
number={3},
pages={171-210},
doi={10.23842/jif.2020.31.3.006}

TY - JOUR
AU - Cheoljun Eom
TI - Improvement of Optimal Portfolio using Correlation Matrix
JO - Journal of Insurance and Finance
PY - 2020
VL - 31
IS - 3
PB - Korea Insurance Research Institute
SP - 171
EP - 210
SN - 2384-3209
AB - This study empirically investigates the practical applicability of Markowitz (1952) optimization function through correlation matrixes among stocks in the Korean stock market. The proposed method is a correlation matrix that removes the property of a market factor included in the sample correlation matrix, that is, the non-market correlation matrix. For comparison with the previous studies, the correlation matrixes that is known in the optimal portfolio are utilized, along with equal-weighted and value-weighted portfolios. According to the results, the optimal portfolio from the non-market correlation matrix may construct better diversified portfolio, and then, achieve lower risk and higher performance compared to other correlation matrixes. In comparison by the perspective of prediction error from expected return and standard deviation of returns, moreover, the optimal portfolio from the non-market correlation matrix has much lower magnitude of sensitivity from prediction error of input variables than those from the other correlation matrixes. These results show the evidence supporting that the non-market correlation matrix has a comparative benefit for improving the practical applicability of the optimal function as well as for effectively reducing the influence of prediction error from input variables.
KW - Optimization;Optimal Portfolio;Correlation Matrix;Certainty Condition;Uncertainty Conditions;Sensitivity Test
DO - 10.23842/jif.2020.31.3.006
ER -

Cheoljun Eom. (2020). Improvement of Optimal Portfolio using Correlation Matrix. Journal of Insurance and Finance, 31(3), 171-210.

Cheoljun Eom. 2020, "Improvement of Optimal Portfolio using Correlation Matrix", Journal of Insurance and Finance, vol.31, no.3 pp.171-210. Available from: doi:10.23842/jif.2020.31.3.006

Cheoljun Eom "Improvement of Optimal Portfolio using Correlation Matrix" Journal of Insurance and Finance 31.3 pp.171-210 (2020) : 171.

Cheoljun Eom. Improvement of Optimal Portfolio using Correlation Matrix. 2020; 31(3), 171-210. Available from: doi:10.23842/jif.2020.31.3.006

Cheoljun Eom. "Improvement of Optimal Portfolio using Correlation Matrix" Journal of Insurance and Finance 31, no.3 (2020) : 171-210.doi: 10.23842/jif.2020.31.3.006

Cheoljun Eom. Improvement of Optimal Portfolio using Correlation Matrix. Journal of Insurance and Finance, 31(3), 171-210. doi: 10.23842/jif.2020.31.3.006

Cheoljun Eom. Improvement of Optimal Portfolio using Correlation Matrix. Journal of Insurance and Finance. 2020; 31(3) 171-210. doi: 10.23842/jif.2020.31.3.006

Cheoljun Eom. Improvement of Optimal Portfolio using Correlation Matrix. 2020; 31(3), 171-210. Available from: doi:10.23842/jif.2020.31.3.006

Cheoljun Eom. "Improvement of Optimal Portfolio using Correlation Matrix" Journal of Insurance and Finance 31, no.3 (2020) : 171-210.doi: 10.23842/jif.2020.31.3.006