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Stochastic dominance and optimal portfolio

Author

Listed:
  • Kais Dachraoui

    (HEC Montreal, Canada Research Chair in Risk Management)

  • Georges Dionne

    (HEC Montreal, Canada Research Chair in Risk Management)

Abstract

We analyze the effect of generalized first and second order stochastic dominance changes in a returns distribution on optimal financial portfolios with two risky and a risk free assets. We show that constant relative risk aversion plays an important role in explaining how the composition of the portfolios is affected. The results are interpreted in terms of two-fund separation.

Suggested Citation

  • Kais Dachraoui & Georges Dionne, 2001. "Stochastic dominance and optimal portfolio," Working Papers 01-1, HEC Montreal, Canada Research Chair in Risk Management.
    • Handle: RePEc:ris:crcrmw:2001_001
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    Cited by:

    1. is not listed on IDEAS
    2. Anissa Chaibi & Maria-Lenuta Ciupac-Ulici & Mircea-Cristian Gherman, 2014. "Do Recent Stochastic Tools Help to Better Understand Investors Preference and Asset Allocation?," Working Papers 2014-130, Department of Research, Ipag Business School.
    3. Enrique Ballestero & David Pla-Santamaria, 2005. "Grading the performance of market indicators with utility benchmarks selected from Footsie: a 2000 case study," Applied Economics, Taylor & Francis Journals, vol. 37(18), pages 2147-2160.

    More about this item

    Keywords

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    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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