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Weighted selection from elliptical distributions: a stochastic representation and an application to portfolio separation

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  • Nils Chr Framstad

Abstract

We represent (weighted-)selection-elliptical distributions as an affine combination of the $q$ selection variables plus an elliptical term whose direction alone is independent. This form suffices for $q+2$ fund separation via first-order stochastic dominance, inter alia relaxing Simaan's (1993) three-fund assumptions.

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  • Nils Chr Framstad, 2026. "Weighted selection from elliptical distributions: a stochastic representation and an application to portfolio separation," Papers 2610.11822, arXiv.org.
    • Handle: RePEc:arx:papers:2610.11822
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    References listed on IDEAS

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    1. 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.
    2. Framstad, N.C., 2011. "Portfolio separation properties of the skew-elliptical distributions, with generalizations," Statistics & Probability Letters, Elsevier, vol. 81(12), pages 1862-1866.
    3. J. Tobin, 1958. "Liquidity Preference as Behavior Towards Risk," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 25(2), pages 65-86.
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