COMPARISONS OF THE EX POST EFFICIENT PORTFOLIOS UNDER GARCH(1,1) MODELING AND GARCH MODEL EXTENSIONS

Abstract: Markowitz’s mean-variance portfolio selection and efficient frontier pioneered the developments of modern portfolio optimization theory. In this paper the left-shifting role of the GARCH(1,1) (General Autoregressive Conditional Heteroskedastic) model in efficient frontier is revealed by comparing with the frontiers of its extensions, say, EGARCH, TARCH, PARCH and C-ARCH models. Our investigations have shown that within the Sharpe single index framework, apparent shifts to the left in the efficient frontier of the GARCH(1,1) is observed. It is believed that this empirical discovery is very important to the financial engineering research and practices