Diversified portfolios outperform in minimizing risks and maximizing returns.
The researchers compared two ways to measure risk in building investment portfolios: variance and conditional value-at-risk (CVaR). They used data from FBMKLCI stocks and computer software to create optimized portfolios. The results showed that mean-variance portfolios are more diversified, while mean-CVaR portfolios are better at minimizing risks for high returns. Overall, mean-CVaR portfolios had lower risk values and higher standard deviations compared to mean-variance portfolios.