IDEAS home Printed from https://ideas.repec.org/a/mes/emfitr/v47y2011i0s5p5-24.html
   My bibliography  Save this article

Set-Portfolio Selection with the Use of Market Stochastic Bounds

Author

Listed:
  • Sergio Ortobelli Lozza
  • Enrico Angelelli
  • Daniele Toninelli

Abstract

This paper proposes an ex post comparison of portfolio selection strategies. These strategies are applied to a set of assets, preselected among about 10,000 stocks on the global market. The preselection criteria consider the joint Markovian behavior of the returns and their association with the market stochastic bounds. Furthermore, we examine the performance and the impact of different strategies that use or do not use the preselection criteria. Finally, we compare the ex post wealth obtained with the optimization of several reward-risk performance functionals that use the stochastic bounds of the preselected assets.

Suggested Citation

  • Sergio Ortobelli Lozza & Enrico Angelelli & Daniele Toninelli, 2011. "Set-Portfolio Selection with the Use of Market Stochastic Bounds," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 47(0), pages 5-24, November.
    • Handle: RePEc:mes:emfitr:v:47:y:2011:i:0s5:p:5-24
    as

    Download full text from publisher

    File URL: http://mesharpe.metapress.com/link.asp?target=contribution&id=H2221550703T2UPV
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Stephen A. Ross, 2005. "Mutual Fund Separation in Financial Theory—The Separating Distributions," World Scientific Book Chapters, in: Sudipto Bhattacharya & George M Constantinides (ed.), Theory Of Valuation, chapter 10, pages 309-356, World Scientific Publishing Co. Pte. Ltd..
    2. Ait-Sahalia, Yacine, 1996. "Nonparametric Pricing of Interest Rate Derivative Securities," Econometrica, Econometric Society, vol. 64(3), pages 527-560, May.
    3. Stutzer, Michael, 1996. "A Simple Nonparametric Approach to Derivative Security Valuation," Journal of Finance, American Finance Association, vol. 51(5), pages 1633-1652, December.
    4. Greyserman, Alex & Jones, Douglas H. & Strawderman, William E., 2006. "Portfolio selection using hierarchical Bayesian analysis and MCMC methods," Journal of Banking & Finance, Elsevier, vol. 30(2), pages 669-678, February.
    5. Haim Levy, 1992. "Stochastic Dominance and Expected Utility: Survey and Analysis," Management Science, INFORMS, vol. 38(4), pages 555-593, April.
    6. Nicholas Barberis & Ming Huang, 2001. "Mental Accounting, Loss Aversion, and Individual Stock Returns," Journal of Finance, American Finance Association, vol. 56(4), pages 1247-1292, August.
    7. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    8. Shlomo Benartzi & Richard H. Thaler, 1995. "Myopic Loss Aversion and the Equity Premium Puzzle," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(1), pages 73-92.
    9. K. Geert Rouwenhorst, 1998. "International Momentum Strategies," Journal of Finance, American Finance Association, vol. 53(1), pages 267-284, February.
    10. Jin-Chuan Duan & Evan Dudley & Geneviève Gauthier & Jean-Guy Simonato, 1999. "Pricing Discretely Monitored Barrier Options by a Markov Chain," CIRANO Working Papers 99s-15, CIRANO.
    11. Benoit Mandelbrot, 1963. "New Methods in Statistical Economics," Journal of Political Economy, University of Chicago Press, vol. 71, pages 421-421.
    12. Nicholas Barberis & Ming Huang, 2001. "Mental Accounting, Loss Aversion, and Individual Stock Returns," NBER Working Papers 8190, National Bureau of Economic Research, Inc.
    13. Timotheos Angelidis, 2010. "Idiosyncratic Risk in Emerging Markets," The Financial Review, Eastern Finance Association, vol. 45(4), pages 1053-1078, November.
    14. Pflug, Georg Ch. & Pichler, Alois & Wozabal, David, 2012. "The 1/N investment strategy is optimal under high model ambiguity," Journal of Banking & Finance, Elsevier, vol. 36(2), pages 410-417.
    15. Constantinos Kardaras & Eckhard Platen, 2008. "Minimizing the Expected Market Time to Reach a Certain Wealth Level," Research Paper Series 230, Quantitative Finance Research Centre, University of Technology, Sydney.
    16. Benoit Mandelbrot, 2015. "The Variation of Certain Speculative Prices," World Scientific Book Chapters, in: Anastasios G Malliaris & William T Ziemba (ed.), THE WORLD SCIENTIFIC HANDBOOK OF FUTURES MARKETS, chapter 3, pages 39-78, World Scientific Publishing Co. Pte. Ltd..
    17. Cox, John C. & Ross, Stephen A. & Rubinstein, Mark, 1979. "Option pricing: A simplified approach," Journal of Financial Economics, Elsevier, vol. 7(3), pages 229-263, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sergio Ortobelli & Noureddine Kouaissah & Tomáš Tichý, 2017. "On the impact of conditional expectation estimators in portfolio theory," Computational Management Science, Springer, vol. 14(4), pages 535-557, October.
    2. Billio, Monica & Caporin, Massimiliano & Costola, Michele, 2015. "Backward/forward optimal combination of performance measures for equity screening," The North American Journal of Economics and Finance, Elsevier, vol. 34(C), pages 63-83.
    3. Sergio Ortobelli Lozza & Enrico Angelelli & Alda Ndoci, 2019. "Timing portfolio strategies with exponential Lévy processes," Computational Management Science, Springer, vol. 16(1), pages 97-127, February.
    4. Sergio Ortobelli & Tomáš Tichý, 2015. "On the impact of semidefinite positive correlation measures in portfolio theory," Annals of Operations Research, Springer, vol. 235(1), pages 625-652, December.
    5. Sergio Ortobelli & Sebastiano Vitali & Marco Cassader & Tomáš Tichý, 2018. "Portfolio selection strategy for fixed income markets with immunization on average," Annals of Operations Research, Springer, vol. 260(1), pages 395-415, January.
    6. Nijolė MAKNICKIENĖ & Jelena STANKEVIČIENĖ & Algirdas MAKNICKAS, 2020. "Comparison of Forex Market Forecasting Tools Based on Evolino Ensemble and Technical Analysis Indicators," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 134-148, September.
    7. Mohammad Mehdi Hosseinzadeh & Sergio Ortobelli Lozza & Farhad Hosseinzadeh Lotfi & Vittorio Moriggia, 2023. "Portfolio optimization with asset preselection using data envelopment analysis," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 31(1), pages 287-310, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Glaser, Markus & Nöth, Markus & Weber, Martin, 2003. "Behavioral finance," Papers 03-14, Sonderforschungsbreich 504.
    2. Kyubin Yim & Gabjin Oh & Seunghwan Kim, 2016. "Understanding Financial Market States Using an Artificial Double Auction Market," PLOS ONE, Public Library of Science, vol. 11(3), pages 1-15, March.
    3. Jakusch, Sven Thorsten, 2017. "On the applicability of maximum likelihood methods: From experimental to financial data," SAFE Working Paper Series 148, Leibniz Institute for Financial Research SAFE, revised 2017.
    4. Jakusch, Sven Thorsten & Meyer, Steffen & Hackethal, Andreas, 2019. "Taming models of prospect theory in the wild? Estimation of Vlcek and Hens (2011)," SAFE Working Paper Series 146, Leibniz Institute for Financial Research SAFE, revised 2019.
    5. Kouaissah, Noureddine, 2021. "Using multivariate stochastic dominance to enhance portfolio selection and warn of financial crises," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 480-493.
    6. Chabi-Yo, Fousseni & Ruenzi, Stefan & Weigert, Florian, 2018. "Crash Sensitivity and the Cross Section of Expected Stock Returns," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 53(3), pages 1059-1100, June.
    7. Arkes, Hal R. & Hirshleifer, David & Jiang, Danling & Lim, Sonya S., 2010. "A cross-cultural study of reference point adaptation: Evidence from China, Korea, and the US," Organizational Behavior and Human Decision Processes, Elsevier, vol. 112(2), pages 99-111, July.
    8. Jinesh Jain & Nidhi Walia & Simarjeet Singh & Esha Jain, 2022. "Mapping the field of behavioural biases: a literature review using bibliometric analysis," Management Review Quarterly, Springer, vol. 72(3), pages 823-855, September.
    9. Sergio Ortobelli & Tomáš Tichý, 2015. "On the impact of semidefinite positive correlation measures in portfolio theory," Annals of Operations Research, Springer, vol. 235(1), pages 625-652, December.
    10. Detlef Seese & Christof Weinhardt & Frank Schlottmann (ed.), 2008. "Handbook on Information Technology in Finance," International Handbooks on Information Systems, Springer, number 978-3-540-49487-4, November.
    11. Johannes Abeler & Felix Marklein, 2017. "Fungibility, Labels, and Consumption," Journal of the European Economic Association, European Economic Association, vol. 15(1), pages 99-127.
    12. Barberis, Nicholas & Xiong, Wei, 2012. "Realization utility," Journal of Financial Economics, Elsevier, vol. 104(2), pages 251-271.
    13. Henri Bertholon & Alain Monfort & Fulvio Pegoraro, 2006. "Pricing and Inference with Mixtures of Conditionally Normal Processes," Working Papers 2006-28, Center for Research in Economics and Statistics.
    14. Loredana Ureche-Rangau & Quiterie de Rorthays, 2009. "More on the volatility-trading volume relationship in emerging markets: The Chinese stock market," Journal of Applied Statistics, Taylor & Francis Journals, vol. 36(7), pages 779-799.
    15. Adam Zaremba & Jacob Koby Shemer, 2018. "Price-Based Investment Strategies," Springer Books, Springer, number 978-3-319-91530-2, November.
    16. Ortobelli, Sergio & Rachev, Svetlozar & Schwartz, Eduardo, 2000. "The Problem of Optimal Asset Allocation with Stable Distributed Returns," University of California at Los Angeles, Anderson Graduate School of Management qt3zd6q86c, Anderson Graduate School of Management, UCLA.
    17. Carmen López-Martín & Sonia Benito Muela & Raquel Arguedas, 2021. "Efficiency in cryptocurrency markets: new evidence," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 11(3), pages 403-431, September.
    18. Mohammed Abdellaoui & Han Bleichrodt & Hilda Kammoun, 2013. "Do financial professionals behave according to prospect theory? An experimental study," Theory and Decision, Springer, vol. 74(3), pages 411-429, March.
    19. Luiz Félix & Roman Kräussl & Philip Stork, 2019. "Single Stock Call Options as Lottery Tickets: Overpricing and Investor Sentiment," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 20(4), pages 385-407, October.
    20. Francisco Gomes & Michael Haliassos & Tarun Ramadorai, 2021. "Household Finance," Journal of Economic Literature, American Economic Association, vol. 59(3), pages 919-1000, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mes:emfitr:v:47:y:2011:i:0s5:p:5-24. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/MREE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.