Portfolio selection model based on Drawdown performance measure

The question of correct portfolio selection dominates always more in economics life. Correct portfolio selection allows fulfilling the investing goals. It does not matter whether the goal is the risk minimization, revenue maximization, or portfolio performance maximization. The model of portfolio selection is the tool, how to find the optimal portfolio composition depending on investors profile (risk attitude of investor). Many portfolio creation methods and portfolio management approaches were created. The main result of the presented model may not be only return maximization or risk minimization. It can be the maximization of performance, which the portfolio provides. The performance measure of investment presents results quantification, which we obtain by the chosen strategy of the investor. This quantification presents statistical summarization of reached revenue rate. It presents the estimation of investors risk and measure of manager skills of effective work with risk measure too. In this paper, we use performance measure of the portfolio based on Drawdown. The portfolio selection model is based on maximization of this Drawdown performance measure.