Portfolio Choice Based on Third-Degree Stochastic Dominance

Result code in IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216208%3A11320%2F17%3A10367492" target="_blank" >RIV/00216208:11320/17:10367492 - isvavai.cz</a>

Result on the web

<a href="http://dx.doi.org/10.1287/mnsc.2016.2506" target="_blank" >http://dx.doi.org/10.1287/mnsc.2016.2506</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.1287/mnsc.2016.2506" target="_blank" >10.1287/mnsc.2016.2506</a>

Result language

angličtina

Original language name

Portfolio Choice Based on Third-Degree Stochastic Dominance

Original language description

We develop an optimization method for constructing investment portfolios that dominate a given benchmark portfolio in terms of third-degree stochastic dominance. Our approach relies on the properties of the semivariance function, a refinement of an existing &quot;superconvex&quot; dominance condition, and quadratic constrained programming. We apply our method to historical stock market data using an industry momentum strategy. Our enhanced portfolio generates important performance improvements compared with alternatives based on mean-variance dominance and second-degree stochastic dominance. Relative to the Center for Research in Security Prices all-share index, our portfolio increases average out-of-sample return by almost seven percentage points per annum without incurring more downside risk, using quarterly rebalancing and without short selling.

Czech name

—

Czech description

—

Type

J_imp - Article in a specialist periodical, which is included in the Web of Science database

CEP classification

—

OECD FORD branch

10103 - Statistics and probability

Project

<a href="/en/project/GA15-02938S" target="_blank" >GA15-02938S: Stochastic dominance in operations research</a><br>

Continuities

P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)

Publication year

2017

Confidentiality

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Name of the periodical

Management Science

ISSN

0025-1909

e-ISSN

—

Volume of the periodical

63

Issue of the periodical within the volume

10

Country of publishing house

US - UNITED STATES

Number of pages

12

Pages from-to

3381-3392

UT code for WoS article

000414080400014

EID of the result in the Scopus database

2-s2.0-85029731083