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Orthogonal Subgroups for Portfolio Choice

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  • David A. Hennessy

    (Iowa State University)

Abstract

The orthogonal group on the location-scale family is at the foundation of the stochastic structure underlying CAPM. Relaxing that assumption, we show how less restrictive matrix subgroup symmetries on the location-scale family of asset returns bound asset choices. Sign symmetry is a special case and provides conditions such that the investor does not sell short. Group-generated welfare orderings are also identified

Suggested Citation

  • David A. Hennessy, 2004. "Orthogonal Subgroups for Portfolio Choice," Economics Bulletin, AccessEcon, vol. 7(1), pages 1-7.
    • Handle: RePEc:ebl:ecbull:eb-04g00001
    as

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    References listed on IDEAS

    as
    1. Chamberlain, Gary, 1983. "A characterization of the distributions that imply mean--Variance utility functions," Journal of Economic Theory, Elsevier, vol. 29(1), pages 185-201, February.
    2. David A. Hennessy & Harvey E. Lapan, 2003. "An algebraic theory of portfolio allocation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 22(1), pages 193-210, August.
    3. Owen, Joel & Rabinovitch, Ramon, 1983. "On the Class of Elliptical Distributions and Their Applications to the Theory of Portfolio Choice," Journal of Finance, American Finance Association, vol. 38(3), pages 745-752, June.
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    JEL classification:

    • G0 - Financial Economics - - General
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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