IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

The Problem of Optimal Asset Allocation with Stable Distributed Returns

  • Ortobelli, Sergio
  • Rachev, Svetlozar
  • Schwartz, Eduardo
Registered author(s):

    This paper discusses two optimal allocation problems. We consider different hypotheses of portfolio selection with stable distributed returns for each of them. In particular, we study the optimal allocation between a riskless return and risky stable distributed returns. Furthermore, we examine and compare the optimal allocation obtained with the Gaussian and the stable non-Gaussian distributional assumption for the risky return. KEY WORDS: optimal allocation, stochastic dominance, risk aversion, measure of risk, a stable distribution, domain of attraction, sub-Gaussian stable distributed, fund separation, normal distribution, mean variance analysis, safety-first analysis.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:;origin=repeccitec
    Download Restriction: no

    Paper provided by Anderson Graduate School of Management, UCLA in its series University of California at Los Angeles, Anderson Graduate School of Management with number qt3zd6q86c.

    in new window

    Date of creation: 01 Jan 2000
    Date of revision:
    Handle: RePEc:cdl:anderf:qt3zd6q86c
    Contact details of provider: Postal: 110 Westwood Plaza, Los Angeles, CA. 90095
    Web page:

    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. B. N. Cheng & S. T. Rachev, 1995. "Multivariate Stable Futures Prices," Mathematical Finance, Wiley Blackwell, vol. 5(2), pages 133-153.
    2. Ross, Stephen A., 1976. "The arbitrage theory of capital asset pricing," Journal of Economic Theory, Elsevier, vol. 13(3), pages 341-360, December.
    3. Benoit Mandelbrot, 1963. "New Methods in Statistical Economics," Journal of Political Economy, University of Chicago Press, vol. 71, pages 421.
    4. Milne, Frank, 1988. "Arbitrage and Diversification in a General Equilibrium Asset Economy," Econometrica, Econometric Society, vol. 56(4), pages 815-40, July.
    5. Dybvig, Philip H, 1985. " Acknowledgment: Kinks on the Mean-Variance Frontier," Journal of Finance, American Finance Association, vol. 40(1), pages 345, March.
    6. Connor, Gregory, 1984. "A unified beta pricing theory," Journal of Economic Theory, Elsevier, vol. 34(1), pages 13-31, October.
    7. Martin R. Young, 1998. "A Minimax Portfolio Selection Rule with Linear Programming Solution," Management Science, INFORMS, vol. 44(5), pages 673-683, May.
    8. Chen, Nai-fu & Ingersoll, Jonathan E, Jr, 1983. " Exact Pricing in Linear Factor Models with Finitely Many Assets: A Note," Journal of Finance, American Finance Association, vol. 38(3), pages 985-88, June.
    9. Ross, Stephen A., 1978. "Mutual fund separation in financial theory--The separating distributions," Journal of Economic Theory, Elsevier, vol. 17(2), pages 254-286, April.
    10. 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 745-52, June.
    11. Bawa, Vijay S, 1976. "Admissible Portfolios for All Individuals," Journal of Finance, American Finance Association, vol. 31(4), pages 1169-83, September.
    12. Yusif Simaan, 1993. "Portfolio Selection and Asset Pricing---Three-Parameter Framework," Management Science, INFORMS, vol. 39(5), pages 568-577, May.
    13. Hanoch, G & Levy, Haim, 1969. "The Efficiency Analysis of Choices Involving Risk," Review of Economic Studies, Wiley Blackwell, vol. 36(107), pages 335-46, July.
    14. Bawa, Vijay S., 1975. "Optimal rules for ordering uncertain prospects," Journal of Financial Economics, Elsevier, vol. 2(1), pages 95-121, March.
    15. Aleksander Janicki & Aleksander Weron, 1994. "Simulation and Chaotic Behavior of Alpha-stable Stochastic Processes," HSC Books, Hugo Steinhaus Center, Wroclaw University of Technology, number hsbook9401.
    16. Benoit Mandelbrot, 1967. "The Variation of Some Other Speculative Prices," The Journal of Business, University of Chicago Press, vol. 40, pages 393.
    17. Huberman, Gur, 1982. "A simple approach to arbitrage pricing theory," Journal of Economic Theory, Elsevier, vol. 28(1), pages 183-191, October.
    18. Bawa, Vijay S., 1978. "Safety-First, Stochastic Dominance, and Optimal Portfolio Choice," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 13(02), pages 255-271, June.
    19. Benoit Mandelbrot, 1963. "The Variation of Certain Speculative Prices," The Journal of Business, University of Chicago Press, vol. 36, pages 394.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:cdl:anderf:qt3zd6q86c. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lisa Schiff)

    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 references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.