Abstract
This paper studies how to construct and compare various optimal portfolio frameworks for investors in the context of the Vietnamese stock market. The aim of the study is to help investors to find solutions for constructing an optimal portfolio strategy using modern investment frameworks in the Vietnamese stock market. The study contains a census of the top 43 companies listed on the Ho Chi Minh stock exchange (HOSE) over the ten-year period from July 2010 to January 2021. Optimal portfolios are constructed using Mean-Variance Framework, Mean-CVaR Framework under different copula simulations. Two-thirds of the data from 26/03/2014 to 27/1/2021 consists of the data of Vietnamese stocks during the COVID-19 recession, which caused depression globally; however, the results obtained during this period still provide a consistent outcome with the results for other periods. Furthermore, by randomly attempting different stocks in the research sample, the results also perform the same outcome as previous analyses. At about the same CvaR level of about 2.1%, for example, the Gaussian copula portfolio has daily Mean Return of 0.121%, the t copula portfolio has 0.12% Mean Return, while Mean-CvaR with the Raw Return portfolio has a lower Return at 0.103%, and the last portfolio of Mean-Variance with Raw Return has 0.102% Mean Return. Empirical results for all 10 portfolio levels showed that CVaR copula simulations significantly outperform the historical Mean-CVaR framework and Mean-Variance framework in the context of the Vietnamese stock exchange.
Highlights
In the world, the stock exchange was formed a long time ago, has grown strongly and has become a significant part of the global financial market
To find an optimal portfolio, four frameworks were used such as the Mean-CVaR approach and simulated with t copula and Gaussian copula, as well as the traditional Mean-Variance framework
Empirical results show that in the context of the Vietnamese stock exchange, the Mean-CVaR framework generally scores better than the Mean-Variance framework
Summary
The stock exchange was formed a long time ago, has grown strongly and has become a significant part of the global financial market. The stock market plays a vital role in the growth of industries in many countries that eventually affects the economy to a great extent. Realizing the importance of the stock exchange to the economy, the stock exchange in Vietnam has been officially operated since 2000. After 20 years, it has taken certain steps, providing new investment opportunities for both corporations and investors, as well as developing the financial market. The stock market has been noticeable but has become an integral part of socio-economic life; it has attracted many investors. The Vietnamese capital market is still primarily a stock market, with over 80% of capital flows being stocks
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