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In the framework of multispecies fisheries governance, the main objective of this paper is to apply modern portfolio theory (MPT) to the North-East Atlantic European fisheries, including all the key commercial fish species subject to total allowable catches (TAC) and quota regimes within the EU. This is done, first, quantifying the inherent return and risk of the potential fish portfolios and, secondly, estimating an individual constrained financial efficient frontier (FEF) for each of the nine fishing countries in the North-East Atlantic. Unlike previous studies in the field of financial fisheries economics, and due to its major robustness under non-normality and the presence of fat tails, we are using Conditional Value-at-Risk (CVaR) instead of the conventional mean-variance optimization (MVO) as the method to solve the optimization problem of minimizing risk under a set of alter-native constraints so as to obtain the respective FEFs. Our results show that changing the species portfolio distribution, it would be possible to improve efficiency, that is to say, to simultaneously get increasing returns and decreasing risk levels. Moreover, this efficiency gain would be compatible with specific quota transfers among fishing countries. Itsaso Lopetegui is grateful for the financial support from the Predoctoral Research Training Program from the Basque Government, Spain (Programa Predoctoral de Formación de Personal Investigador No Doctor del Departamento de Educación, Política Lingüística y Cultura del Gobierno Vasco) and research grant EGONLABUR from the same department. This study has received financial support from the Spanish Ministry of Economics and Competitiveness, Spain (Project Ref: RTI2018–099225-B-I00). |
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