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Portfolio Risk Management Using The Lorenz Curve

Author

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  • Haim Shalit

    (Department of Economics, Ben-Gurion University of the Negev, Israel)

Abstract

This paper compiles the risk measures associated with the Lorenz curve. The Lorenz curve is the main tool in economics for measuring income distribution and inequality. For the past decades some of the Lorenz curve spin-offs have been used in risk analysis and finance. In particular, the Lorenz curve addresses the concepts of second degree stochastic dominance, Gini’s mean difference, Conditional Value-at-Risk, and the extended Gini in portfolio theory and in investment practice. Because the Lorenz curve can be estimated from asset returns, the risk measures are easy to implement and use.

Suggested Citation

  • Haim Shalit, 2010. "Portfolio Risk Management Using The Lorenz Curve," Working Papers 1011, Ben-Gurion University of the Negev, Department of Economics.
    • Handle: RePEc:bgu:wpaper:1011
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    File URL: http://in.bgu.ac.il/en/humsos/Econ/Workingpapers/1011.pdf
    File Function: First version, 2010
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    Cited by:

    1. Haim Shalit, 2014. "Measuring Risk In Israeli Mutual Funds: Conditional Value-At-Risk Vs. Aumann-Serrano Riskiness Index," Working Papers 1409, Ben-Gurion University of the Negev, Department of Economics.

    More about this item

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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