| Article ID | Journal | Published Year | Pages | File Type |
|---|---|---|---|---|
| 975021 | Physica A: Statistical Mechanics and its Applications | 2015 | 7 Pages |
•The returns and risks of investment portfolio in stock market crashes were investigated.•Both the maximum dispersion of investment portfolio and an optimal stop-loss position maximally enhance the stability of returns.•A worst dispersion is associated with the maximum risks.•The increasing stop-loss position enhances the risks.
The returns and risks of investment portfolio in stock market crashes are investigated by considering a theoretical model, based on a modified Heston model with a cubic nonlinearity, proposed by Spagnolo and Valenti. Through numerically simulating probability density function of returns and the mean escape time of the model, the results indicate that: (i) the maximum stability of returns is associated with the maximum dispersion of investment portfolio and an optimal stop-loss position; (ii) the maximum risks are related with a worst dispersion of investment portfolio and the risks of investment portfolio are enhanced by increasing stop-loss position. In addition, the good agreements between the theoretical result and real market data are found in the behaviors of the probability density function and the mean escape time.
