Optimization of a Portfolio of Investment Projects: A Real Options Approach Using the Omega Measure

Investment decisions usually involve the assessment of more than one financial asset or investment project (real asset). The most appropriate way to analyze the viability of a real asset is not to study it in isolation but as part of a portfolio with correlations between the input variables of the projects. This study proposes an optimization methodology for a portfolio of investment projects with real options based on maximizing the Omega performance measure. The classic portfolio optimization methodology uses the Sharpe ratio as the objective function, which is a function of the mean-variance of the returns of the portfolio distribution. The advantage of using Omega as an objective function is that it takes into account all moments of the portfolio’s distribution of returns or net present values (NPVs), not restricting the analysis to its mean and variance. We present an example to illustrate the proposed methodology, using the Monte Carlo simulation as the main tool due to its high flexibility in modeling uncertainties. The results show that the best risk-return ratio is obtained by optimizing the Omega measure.

O Ouro Atua Como Hedge ou Valor Refúgio Diante de Desvalorizações da BM&FBOVESPA?

This work has analyzed the performance of 31 behavioral mutual funds in the USA, Europe and Japan described in Santoni and Kelshiker (2010). Were observed the performances of the funds and their respective benchmarks in four indicators: the Sharpe index, Sortino Index, Omega Measure and the Behavioral Performance Measure. The horizon of analysis was 10 years (Jan/04 to Dec/14) divided in intervals of 6, 12, 36, 60 and 120 months. Based on the consolidation of indicators the funds were ranked and classified into three bands of performance: top, middle and bottom. In the interval of 120 months there was, in general, no significant (5%) difference in the average performance between the funds and the benchmarks. The analysis by intervals indicated that the performance of the funds in relation to the benchmarks worsen as the investment horizon increases. In shorter intervals (6 and 12 months) there was, in average, a significant difference in performance while in longer maturities (36 and 60 months) the average performance of the funds was significantly lower than the benchmarks. In the mean of all intervals the average performance of the funds was significantly lower than the benchmarks

Fundos Comportamentais possuem Desempenho Superior? Uma Análise baseada em Evidências Internacionais

This work has analyzed the performance of 31 behavioral mutual funds in the USA, Europe and Japan described in Santoni and Kelshiker (2010). Were observed the performances of the funds and their respective benchmarks in four indicators: the Sharpe index, Sortino Index, Omega Measure and the Behavioral Performance Measure. The horizon of analysis was 10 years (Jan/04 to Dec/14) divided in intervals of 6, 12, 36, 60 and 120 months. Based on the consolidation of indicators the funds were ranked and classified into three bands of performance: top, middle and bottom. In the interval of 120 months there was, in general, no significant (5%) difference in the average performance between the funds and the benchmarks. The analysis by intervals indicated that the performance of the funds in relation to the benchmarks worsen as the investment horizon increases. In shorter intervals (6 and 12 months) there was, in average, a significant difference in performance while in longer maturities (36 and 60 months) the average performance of the funds was significantly lower than the benchmarks. In the mean of all intervals the average performance of the funds was significantly lower than the benchmarks

Produtividade e eficiência no mercado de fundos de investimento no Brasil: uma abordagem comparativa.

This paper applies the method known as data envelopment analysis (DEA) to acess the performance of investment funds in Brazil during the period 2012-2014, evaluating a representative sample that is framed in the "Free Shares" category. The results show evidence of improved performance of funds with less equity, and a loss of efficiency and deterioration of performance over the period. The productivity of the fund market was analyzed using the Malmquist index, which showed an average productivity loss total of 15% in the period. In order to validate the DEA model, the study compared the results with those obtained by applying the Omega measure, showing that there is a relationship between the efficiency determined by this measure and the proposed model.

Otimização de Carteiras de Contratos de Energia Elétrica Através da Medida Ômega

The Brazilian electric power industry has been undergoing significant structural changes, including the creation of a free market for electricity. To obtain above average margins, some firms attempt to increase profits by entering into uncovered trading positions, where the long term price is locked in on one side, while on the other side the firm is subject to variations in the short term spot price. In this article we consider the case of an electricity trading company that takes long and short positions in electricity. A model is proposed for the analysis and decision of the best electricity portfolio, based on the optimization of the Omega measure, subjected to Value at Risk - VaR restrictions. In order to adopt the Omega measure the short term prices are simulated. The results indicate that the portfolio decision is a composition between uncovered buy and seasonal buy with flat sell. (Full article available in Portuguese only)