Improved Portfolio Choice Using Second-Order Stochastic Dominance
| Type of Publication: | Journal article |
| URI (citable link): | http://nbn-resolving.de/urn:nbn:de:bsz:352-0-296017 |
| Author: | Hodder, James E.; Jackwerth, Jens Carsten; Kolokolova, Olga |
| Year of publication: | 2015 |
| Published in: | Review of Finance ; 19 (2015), 4. - pp. 1623-1647. - ISSN 1382-6662. - eISSN 1573-692X |
| DOI (citable link): | https://dx.doi.org/10.1093/rof/rfu025 |
| Summary: |
Constructing portfolios based on second-order stochastic dominance (SSD) is theoretically attractive since all risk-averse investors would prefer a dominating portfolio. However, choosing among SSD efficient portfolios is a challenge without an obvious ranking metric. We explore particular choices based on Kuosmanen (2004) plus Kopa and Post (2011), comparing their performance to other SSD-related strategies and to standard portfolio choice approaches. These SSD-related choices outperform portfolios chosen based on their Sharpe ratio, information ratio, or using equal weights. Portfolios based on minimum variance that also match the benchmark’s mean return perform on a par with the SSD-related choices.
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| Subject (DDC): | 330 Economics |
| Link to License: | In Copyright |
| Bibliography of Konstanz: | Yes |
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HODDER, James E., Jens Carsten JACKWERTH, Olga KOLOKOLOVA, 2015. Improved Portfolio Choice Using Second-Order Stochastic Dominance. In: Review of Finance. 19(4), pp. 1623-1647. ISSN 1382-6662. eISSN 1573-692X. Available under: doi: 10.1093/rof/rfu025
@article{Hodder2015Impro-31833, title={Improved Portfolio Choice Using Second-Order Stochastic Dominance}, year={2015}, doi={10.1093/rof/rfu025}, number={4}, volume={19}, issn={1382-6662}, journal={Review of Finance}, pages={1623--1647}, author={Hodder, James E. and Jackwerth, Jens Carsten and Kolokolova, Olga} }
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