Optimalization of your credit score
So far three methodologies for a quantitatively driven process of portfolio construction have been examined. The results of the empirical study show that the way of accounting for skewness, kurtosis and autocorrelation in return series has significant impact on portfolio weights. Measured by riskadjusted performance numbers as well as stochastic dominance criteria, the identified differences between the risk/return profiles of the optimized portfolios seem marginal. However, it has to be considered that so far the process of portfolio optimization and performance measurement has been based on the same sample period. Implicitly perfect foresight has been assumed. There is no doubt that this assumption does not reflect a realistic investment decision-making process under uncertainty. In practice, first a decision about asset allocation is made and implemented. And afterwards the risk and return characteristics of the portfolio are measured either in absolute terms or relative to a benchmark index.
