Asian Emerging Market Government Bond Portfolio Optimization Using Mean-Variance Analysis in the Presence of Duration Constraint
- DOI
- 10.2991/aebmr.k.201222.015How to use a DOI?
- Keywords
- Asian Emerging Market Local Currency Government Bond, Bond Indexes, Mean-Variance Analysis, Duration Constraint, Sharpe Ratio
- Abstract
This study applies Markowitz’s mean-variance optimization method (1952) by setting duration constraint for an investment portfolio consisting of Asian emerging market local currency government bond indexes. The historical return data used in this study are obtained from daily bond indexes of Indonesia, Malaysia, Thailand, the Philippines, and Korea provided by ICE Data Indices, LLC (with permission) for the period of 2010-2019. This study shows that the portfolio composition strategy resulting from the optimization provides the highest Sharpe ratio from January to June 2020 (out-of-sample) compared to several other strategies without any duration constraint, such as capitalization-weighted and equally-weighted, as well as other strategies with duration constraint. End-of-month performance monitoring between January 2020 and June 2020 indicates that the Sharpe ratio of the optimal strategy began to increase after market volatility due to COVID-19 pandemic anxieties, which peaked around March 2020. The optimization strategy in this study would be an alternative strategy for conservative investors to perform asset allocation as a long-term investment policy to have exposure to Asian emerging market before adding other asset classes, such as Asian emerging market corporate bonds and stocks.
- Copyright
- © 2020, the Authors. Published by Atlantis Press.
- Open Access
- This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).
Cite this article
TY - CONF AU - Feby Widyatantri AU - Zaäfri Ananto Husodo PY - 2020 DA - 2020/12/23 TI - Asian Emerging Market Government Bond Portfolio Optimization Using Mean-Variance Analysis in the Presence of Duration Constraint BT - Proceedings of the International Conference on Business and Management Research (ICBMR 2020) PB - Atlantis Press SP - 103 EP - 109 SN - 2352-5428 UR - https://doi.org/10.2991/aebmr.k.201222.015 DO - 10.2991/aebmr.k.201222.015 ID - Widyatantri2020 ER -