Portfolio Construction Based On Stochastic Dominance And Empirical Likelihood
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Author | : Thierry Post |
Publisher | : |
Total Pages | : 44 |
Release | : 2018 |
Genre | : |
ISBN | : |
This study develops a portfolio optimization method based on the Stochastic Dominance (SD) decision criterion and the Empirical Likelihood (EL) estimation method. SD and EL share a distribution-free assumption framework which allows for dynamic and non-Gaussian multivariate return distributions. The SD/EL method can be implemented using a two-stage procedure which first elicits the implied probabilities using Convex Optimization and subsequently constructs the optimal portfolio using Linear Programming. The solution asymptotically dominates the benchmark and optimizes the goal function in probability, for a class of weakly dependent processes. A Monte Carlo simulation experiment illustrates the improvement in estimation precision using a set of conservative moment conditions about common factors in small samples. In an application to equity industry momentum strategies, SD/EL yields important out-of-sample performance improvements relative to heuristic diversification, Mean-Variance optimization, and a simple 'plug-in' approach.
Author | : Andrey M. Lizyayev |
Publisher | : Rozenberg Publishers |
Total Pages | : 136 |
Release | : 2010 |
Genre | : |
ISBN | : 9036101875 |
Author | : Leili Javanmardi |
Publisher | : |
Total Pages | : |
Release | : 2013 |
Genre | : |
ISBN | : |
Author | : Songsak Sriboonchita |
Publisher | : CRC Press |
Total Pages | : 456 |
Release | : 2009-10-19 |
Genre | : Business & Economics |
ISBN | : 1420082671 |
Drawing from many sources in the literature, Stochastic Dominance and Applications to Finance, Risk and Economics illustrates how stochastic dominance (SD) can be used as a method for risk assessment in decision making. It provides basic background on SD for various areas of applications. Useful Concepts and Techniques for Economics ApplicationsThe
Author | : E. Robert Fernholz |
Publisher | : Springer Science & Business Media |
Total Pages | : 190 |
Release | : 2013-04-17 |
Genre | : Business & Economics |
ISBN | : 1475736991 |
Stochastic portfolio theory is a mathematical methodology for constructing stock portfolios and for analyzing the effects induced on the behavior of these portfolios by changes in the distribution of capital in the market. Stochastic portfolio theory has both theoretical and practical applications: as a theoretical tool it can be used to construct examples of theoretical portfolios with specified characteristics and to determine the distributional component of portfolio return. This book is an introduction to stochastic portfolio theory for investment professionals and for students of mathematical finance. Each chapter includes a number of problems of varying levels of difficulty and a brief summary of the principal results of the chapter, without proofs.
Author | : Thierry Post |
Publisher | : |
Total Pages | : 0 |
Release | : 2012 |
Genre | : |
ISBN | : |
We derive empirical tests for the stochastic dominance efficiency of a given portfolio with respect to all possible portfolios constructed from a set of assets. The tests can be computed using straightforward linear programming. Bootstrapping techniques and asymptotic distribution theory can approximate the sampling properties of the test results and allow for statistical inference. Our results could provide a stimulus to the further proliferation of stochastic dominance for the problem of portfolio selection and evaluation. Using our tests, the Fama and French market portfolio is significantly inefficient relative to benchmark portfolios formed on market capitalization and book-to-market equity ratio.
Author | : G. A. Whitmore |
Publisher | : |
Total Pages | : 424 |
Release | : 1978 |
Genre | : Business & Economics |
ISBN | : |
Theoretical foundations of stochastic dominance; Portfolio applications: empirical studies; Portfolio applications: computational aspects; Applications to financial management and capital markets; Applications in economic theory and analysis.
Author | : Renata Mansini |
Publisher | : Springer |
Total Pages | : 131 |
Release | : 2015-06-10 |
Genre | : Business & Economics |
ISBN | : 3319184822 |
This book presents solutions to the general problem of single period portfolio optimization. It introduces different linear models, arising from different performance measures, and the mixed integer linear models resulting from the introduction of real features. Other linear models, such as models for portfolio rebalancing and index tracking, are also covered. The book discusses computational issues and provides a theoretical framework, including the concepts of risk-averse preferences, stochastic dominance and coherent risk measures. The material is presented in a style that requires no background in finance or in portfolio optimization; some experience in linear and mixed integer models, however, is required. The book is thoroughly didactic, supplementing the concepts with comments and illustrative examples.
Author | : Haim Levy |
Publisher | : Springer Science & Business Media |
Total Pages | : 439 |
Release | : 2006-08-25 |
Genre | : Business & Economics |
ISBN | : 0387293116 |
This book is devoted to investment decision-making under uncertainty. The book covers three basic approaches to this process: the stochastic dominance approach; the mean-variance approach; and the non-expected utility approach, focusing on prospect theory and its modified version, cumulative prospect theory. Each approach is discussed and compared. In addition, this volume examines cases in which stochastic dominance rules coincide with the mean-variance rule and considers how contradictions between these two approaches may occur.
Author | : Daniel Fischmar |
Publisher | : |
Total Pages | : 36 |
Release | : 1990 |
Genre | : Futures market |
ISBN | : |