publication . Article . 2016

Portfolios Dominating Indices: Optimization with Second-Order Stochastic Dominance Constraints vs. Minimum and Mean Variance Portfolios

Keçeci, Neslihan Fidan; Kuzmenko, Viktor; Uryasev, Stan;
Open Access English
  • Published: 04 Oct 2016 Journal: Journal of Risk and Financial Management (issn: 1911-8074, Copyright policy)
  • Publisher: MDPI AG
Abstract
The paper compares portfolio optimization with the Second-Order Stochastic Dominance (SSD) constraints with mean-variance and minimum variance portfolio optimization. As a distribution-free decision rule, stochastic dominance takes into account the entire distribution of return rather than some specific characteristic, such as variance. The paper is focused on practical applications of the portfolio optimization and uses the Portfolio Safeguard (PSG) package, which has precoded modules for optimization with SSD constraints, mean-variance and minimum variance portfolio optimization. We have done in-sample and out-of-sample simulations for portfolios of stocks fro...
Subjects
arXiv: Computer Science::Computational Engineering, Finance, and ScienceStatistics::Other StatisticsMathematics::Optimization and Control
free text keywords: S&P 100 Index, stochastic dominance, stochastic order, portfolio optimization, portfolio selection, Dow Jones Index, S&amp, P 100 Index, DAX index, partial moment, conditional value-at-risk, CVaR, Risk in industry. Risk management, HD61, Finance, HG1-9999, Stochastic ordering, Economics, Actuarial science, Portfolio, Minimum-variance unbiased estimator, Expected shortfall, Post-modern portfolio theory, Econometrics, ddc:330
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publication . Article . 2016

Portfolios Dominating Indices: Optimization with Second-Order Stochastic Dominance Constraints vs. Minimum and Mean Variance Portfolios

Keçeci, Neslihan Fidan; Kuzmenko, Viktor; Uryasev, Stan;