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- Title
Stochastic Bounds for Reference Sets in Portfolio Analysis.
- Authors
Arvanitis, Stelios; Post, Thierry; Topaloglou, Nikolas
- Abstract
A stochastic bound is a portfolio that stochastically dominates all alternatives in a reference portfolio set instead of a single alternative portfolio. An approximate bound is a portfolio that comes as close as possible to this ideal. To identify and analyze exact or approximate bounds, feasible approaches to numerical optimization and statistical inference are developed based on linear programming and subsampling. The use of reference sets and stochastic bounds is shown to improve investment performance in representative applications to enhanced benchmarking using equity industry rotation and equity index options combinations. This paper was accepted by Kay Giesecke, finance.
- Subjects
LINEAR programming; INFERENTIAL statistics; STOCHASTIC dominance; ROTATIONAL motion
- Publication
Management Science, 2021, Vol 67, Issue 12, p7737
- ISSN
0025-1909
- Publication type
Article
- DOI
10.1287/mnsc.2020.3838