Measuring of second–order stochastic dominance portfolio efficiency

Miloš Kopa

Kybernetika (2010)

  • Volume: 46, Issue: 3, page 488-500
  • ISSN: 0023-5954

Abstract

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In this paper, we deal with second-order stochastic dominance (SSD) portfolio efficiency with respect to all portfolios that can be created from a considered set of assets. Assuming scenario approach for distribution of returns several SSD portfolio efficiency tests were proposed. We introduce a δ -SSD portfolio efficiency approach and we analyze the stability of SSD portfolio efficiency and δ -SSD portfolio efficiency classification with respect to changes in scenarios of returns. We propose new SSD and δ -SSD portfolio efficiency measures as measures of the stability. We derive a non-linear and mixed-integer non-linear programs for evaluating these measures. Contrary to all existing SSD portfolio inefficiency measures, these new measures allow us to compare any two δ -SSD efficient or SSD efficient portfolios. Finally, using historical US stock market data, we compute δ -SSD and SSD portfolio efficiency measures of several SSD efficient portfolios.

How to cite

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Kopa, Miloš. "Measuring of second–order stochastic dominance portfolio efficiency." Kybernetika 46.3 (2010): 488-500. <http://eudml.org/doc/196506>.

@article{Kopa2010,
abstract = {In this paper, we deal with second-order stochastic dominance (SSD) portfolio efficiency with respect to all portfolios that can be created from a considered set of assets. Assuming scenario approach for distribution of returns several SSD portfolio efficiency tests were proposed. We introduce a $\delta $-SSD portfolio efficiency approach and we analyze the stability of SSD portfolio efficiency and $\delta $-SSD portfolio efficiency classification with respect to changes in scenarios of returns. We propose new SSD and $\delta $-SSD portfolio efficiency measures as measures of the stability. We derive a non-linear and mixed-integer non-linear programs for evaluating these measures. Contrary to all existing SSD portfolio inefficiency measures, these new measures allow us to compare any two $\delta $-SSD efficient or SSD efficient portfolios. Finally, using historical US stock market data, we compute $\delta $-SSD and SSD portfolio efficiency measures of several SSD efficient portfolios.},
author = {Kopa, Miloš},
journal = {Kybernetika},
keywords = {stochastic dominance; stability; SSD portfolio efficiency measure; stability; stochastic dominance; SSD portfolio efficiency measure},
language = {eng},
number = {3},
pages = {488-500},
publisher = {Institute of Information Theory and Automation AS CR},
title = {Measuring of second–order stochastic dominance portfolio efficiency},
url = {http://eudml.org/doc/196506},
volume = {46},
year = {2010},
}

TY - JOUR
AU - Kopa, Miloš
TI - Measuring of second–order stochastic dominance portfolio efficiency
JO - Kybernetika
PY - 2010
PB - Institute of Information Theory and Automation AS CR
VL - 46
IS - 3
SP - 488
EP - 500
AB - In this paper, we deal with second-order stochastic dominance (SSD) portfolio efficiency with respect to all portfolios that can be created from a considered set of assets. Assuming scenario approach for distribution of returns several SSD portfolio efficiency tests were proposed. We introduce a $\delta $-SSD portfolio efficiency approach and we analyze the stability of SSD portfolio efficiency and $\delta $-SSD portfolio efficiency classification with respect to changes in scenarios of returns. We propose new SSD and $\delta $-SSD portfolio efficiency measures as measures of the stability. We derive a non-linear and mixed-integer non-linear programs for evaluating these measures. Contrary to all existing SSD portfolio inefficiency measures, these new measures allow us to compare any two $\delta $-SSD efficient or SSD efficient portfolios. Finally, using historical US stock market data, we compute $\delta $-SSD and SSD portfolio efficiency measures of several SSD efficient portfolios.
LA - eng
KW - stochastic dominance; stability; SSD portfolio efficiency measure; stability; stochastic dominance; SSD portfolio efficiency measure
UR - http://eudml.org/doc/196506
ER -

References

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