The Conditional Value at Risk as a Risk Constraint in Optimal Investment Portfolio: An Analytical Study
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Abstract
This study aims to measure the value-at-risk (VaR) of a group of investment portfolios and use it as a constraint in portfolio composition. This was achieved by utilising the conditional value at Risk (CVaR), also known as the mean value at Risk (Mean-VaR), which is a proxy for risk in investment portfolios. The study resorted to returns for the period (2012-2024) and employed SPSS statistical software. For accomplishing its objective, this study adopted the main hypothesis: "The conditional value at risk is a reliable measure of risk and therefore gives an account for a constraint on the risk of the optimal investment portfolio."
The study reached several conclusions, the most significant of which is that the conditional value-at-risk indicates a financial constraint on the risk of the optimal investment portfolios during the study's periods. The most prominent recommendations from the study are that investment specialists, particularly investment portfolio managers, should embrace techniques and models for calculating and estimating the various aspects of risk involved in investment decision-making, including portfolio risk.
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