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Activity Number:
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130
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Type:
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Contributed
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Date/Time:
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Monday, August 3, 2009 : 8:30 AM to 10:20 AM
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Sponsor:
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Business and Economic Statistics Section
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| Abstract - #305117 |
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Title:
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The Application of the Bayesian Statistics in Portfolio Selection: Background and Case Study of the S&P 500 Yearly Returns
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Author(s):
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Isaac Kpodonou*+
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Companies:
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University of the District of Columbia
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Address:
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6208 Pontiac St, College Park, MD, 20740,
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Keywords:
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bayesian ; bootstrapping ; portfolio ; selection ; case ; study
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Abstract:
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This paper contributes to portfolio selection methodology using a Bayesian investigation of the distribution of returns. A case study of the yearly returns of the S&P 500 index has been performed using the empirical Bayesian method. In evaluating our prior, bootstrapping has been performed for a replication of the return means. The final conclusions on our case study show that even though the model is somewhat limited in evaluating and predicting the returns, this is mainly due to the lack of both more information on the performance and advanced Bayesian methods. However, this example will demonstrate how effectively the Bayesian inference will be of a great use in reducing the guessing work in the portfolio selection.
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