A Note on Asset Proportions, Stochastic Dominance, and the 50% Rule
AbstractIn this note we analyze the composition of an optimal portfolio by considering the cumulative conditional expected outcome of two dependent assets. We develop a conditional stochastic dominance relation and show that for any concave von Neumann-Morgenstern utility function, the proportion of wealth invested in the dominant asset will be greater than 50%.
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Bibliographic InfoArticle provided by INFORMS in its journal Management Science.
Volume (Year): 45 (1999)
Issue (Month): 12 (December)
stochastic dominance; conditional density function; optimal proportion; risk aversion; demand problem;
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