We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
OPTIMAL PORTFOLIO SELECTION WITH A SHORTFALL PROBABILITY CONSTRAINT: EVIDENCE FROM ALTERNATIVE DISTRIBUTION FUNCTIONS.
- Authors
Akcay, Yalcin; Yalcin, Atakan
- Abstract
We propose a new approach to optimal portfolio selection in a downside risk framework that allocates assets by maximizing expected return subject to a shortfall probability constraint, reflecting the typical desire of a risk-averse investor to limit the maximum likely loss. Our empirical results indicate that the loss-averse portfolio outperforms the widely used mean-variance approach based on the cumulative cash values, geometric mean returns, and average risk-adjusted returns. We also evaluate the relative performance of the loss-averse portfolio with normal, symmetric thin-tailed, symmetric fat-tailed, and skewed fat-tailed return distributions in terms of average return, risk, and average risk-adjusted return.
- Subjects
PORTFOLIO management (Investments) -- Mathematical models; MATHEMATICAL optimization; PROBABILITY measures; DISTRIBUTION (Probability theory); RISK -- Mathematical models; ASSET allocation; RISK aversion; FINANCIAL performance
- Publication
Journal of Financial Research, 2010, Vol 33, Issue 1, p77
- ISSN
0270-2592
- Publication type
Article
- DOI
10.1111/j.1475-6803.2009.01263.x