In this paper, we present some characterizations of efficient sets using the stochastic dominance rules and comparing the safety-first approach with the stable Paretian analysis. We introduce a new stable Paretian version of the Markowitz financial optimization model in order to find an optimal frontier based on a more realistic model for the distribution of asset returns. As a generalization of moments analysis, we consider a portfolio selection for an investor who wishes to allocate his initial wealth across n investments with returns following general heavy-tailed distributions. Alternatively, we show that the safety-first approach can be more efficient than the stable Paretian approach. Finally, we present two possible direct methods for portfolio choice in a safety-first world.

(2001). Safety-first analysis and stable Paretian approach to portfolio choice theory [journal article - articolo]. In MATHEMATICAL AND COMPUTER MODELLING. Retrieved from http://hdl.handle.net/10446/203400

Safety-first analysis and stable Paretian approach to portfolio choice theory

Ortobelli Lozza, Sergio;
2001-01-01

Abstract

In this paper, we present some characterizations of efficient sets using the stochastic dominance rules and comparing the safety-first approach with the stable Paretian analysis. We introduce a new stable Paretian version of the Markowitz financial optimization model in order to find an optimal frontier based on a more realistic model for the distribution of asset returns. As a generalization of moments analysis, we consider a portfolio selection for an investor who wishes to allocate his initial wealth across n investments with returns following general heavy-tailed distributions. Alternatively, we show that the safety-first approach can be more efficient than the stable Paretian approach. Finally, we present two possible direct methods for portfolio choice in a safety-first world.
articolo
2001
ORTOBELLI LOZZA, Sergio; Rachev, Svetlozar T.
(2001). Safety-first analysis and stable Paretian approach to portfolio choice theory [journal article - articolo]. In MATHEMATICAL AND COMPUTER MODELLING. Retrieved from http://hdl.handle.net/10446/203400
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10446/203400
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