Optimising a Mining Portfolio Using CVaR

Authors

David E. Allen, Edith Cowan UniversityFollow
Akhmad R. Kramadibrata, Edith Cowan University
Robert J. Powell, Edith Cowan UniversityFollow
Abhay K. Singh, Edith Cowan UniversityFollow

Document Type

Conference Proceeding

Publisher

World Business Institute Australia

Faculty

Faculty of Business and Law

School

School of Accounting, Finance and Economics / Finance, Economics, Markets and Accounting Research Centre

RAS ID

12967

Comments

Allen, D. E., Kramadibrata, A. R., Powell, R.J. , & Singh, A.K. (2011). Optimising a mining portfolio using CVaR. Proceedings of the Fifteenth International Business Research Conference, Sydney 2011. Available here

Abstract

The mining industry can be extremely volatile during times of economic downturn. We compare extreme risk in mining share portfolios from each of the world’s seven leading mining areas using Conditional Value at Risk (CVaR) which measures those risks beyond traditional Value at Risk (VaR) metrics. We also show how CVaR can be used to optimise portfolios and minimise extreme risk. We find significant differences between countries in CVaR as compared to standard deviation risk rankings, as well as differences in portfolios optimised using CVaR compared to portfolios using traditional variance methodology. This indicates that investors will not adequately minimise risk using traditional approaches.

DOI

10.2139/ssrn.1967312

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