
handle: 10419/86599
Consider the portfolio problem of choosing the mix between stocks and bonds under a downside risk constraint. Typically stock returns exhibit fatter tails than bonds corresponding to their greater downside risk. Downside risk criteria like the safety first criterion therefore often select corner solutions in the sense of a bonds only portfolio. This is due to a focus on the asymptotically dominating first order Pareto term of the portfolio return distribution. We show that if second order terms are taken into account, a balanced solution emerges. The theory is applied to empirical examples from the literature.
Portfolio-Management, portfolio diversification, Entscheidung bei Risiko, ddc:330, safety first, safety first; heavy tails; portfolio diversification, EUR ESE 33, G11, heavy tails, jel: jel:G11
Portfolio-Management, portfolio diversification, Entscheidung bei Risiko, ddc:330, safety first, safety first; heavy tails; portfolio diversification, EUR ESE 33, G11, heavy tails, jel: jel:G11
| selected citations These citations are derived from selected sources. This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically). | 25 | |
| popularity This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network. | Top 10% | |
| influence This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically). | Top 10% | |
| impulse This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network. | Average |
