Second-order stochastic dominance, reward-risk portfolio selection, and the CAPM

Journal of Financial and Quantitative Analysis

Volumn 43, Issue 2, 2008, Pages 525-546

  De Giorgi, Enrico ^a   Post, Thierry ^b  

^a UNIVERSITY OF LUGANO   (Switzerland)

^b ERASMUS UNIVERSITY ROTTERDAM   (Netherlands)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 46849110164     PISSN: 00221090     EISSN: None     Source Type: Journal    
DOI: 10.1017/s0022109000003616     Document Type: Article

References (40)

1. Acerbi, C., and D. Tasche. "On the Coherence of Expected Shortfall." Journal of Banking and Finance, 26 (2002), 1487-1503.
2. Artzner, P.; F. Delbaen; J.-M. Eber; and D. Heath. "Thinking Coherently." Risk, 10 (1997), 68-71.
3. Artzner, P.; F. Delbaen; J.-M. Eber; and D. Heath. "Coherent Measure of Risk." Mathematical Finance, 9 (1999), 203-228.
4. Bassett, G.; R. Koenker; and G. Kordas. "Pessimistic Portfolio Allocation and Choquet Expected Utility." Journal of Financial Econometrics, 2 (2004), 477-492.
5. Bawa, V. "Optimal Rules for Ordering Uncertain Prospects." Journal of Financial Economics, 2 (1975), 95-121.
6. Bawa, V., and E. Lindenberg. "Capital Market Equilibrium in a Mean-Lower Partial Moment Framework." Journal of Financial Economics, 5 (1977), 189-200.
7. Black, F.; M. Jensen; and M. Scholes. "The Capital Asset Pricing Model: Some Empirical Tests." In Studies in the Theory of Capital Markets, M. Jensen, ed. New York: Praeger Publishers (1972).
8. Carlier, G., and R. Dana. "Core of Convex Distortions of a Probability on a Non Atomic Space." Journal of Economic Theory, 113 (2003), 199-222.
9. De Giorgi, E. "Reward-Risk Portfolio Selection and Stochastic Dominance." Journal of Banking and Finance, 29 (2005), 895-926.
10. Duffie, D. Security Markets: Stochastic Models. New York, NY: Academic Press (1998).
11. Ellsberg, D. "Risk, Ambiguity, and the Savage Axioms." Quarterly Journal of Economics, 75 (1961), 643-669.
12. Fama, E., and K. French. "The Cross-Section of Expected Stock Returns." Journal of Finance, 47 (1992), 427-465.
13. Fama, E., and J. MacBeth. "Risk, Return and Equilibrium: Empirical Tests." Journal of Political Economy, 81 (1973), 607-636.
14. Friend, I., and M. Blume. "A New Look at the Capital Asset Pricing Model." Journal of Finance, 28 (1973), 283-299.
15. Gibbons, M.; S. A. Ross; and J. Shanken. "A Test of the Efficiency of a Given Portfolio." Econometrica, 57 (1989), 1121-1152.
16. Harlow, W., and R. Rao. "Asset Pricing in a Generalized Mean-Lower Partial Moment Framework: Theory and Evidence." Journal of Financial and Quantitative Analysis, 25 (1989), 285-311.
17. Hogan, W., and J. Warren. "Toward the Development of an Equilibrium Capital-Market Model Based on Semivariance." Journal of Financial and Quantitative Analysis, 9 (1974), 1-11.
18. Huang, C.-E, and R. Litzenberger. Foundations for Financial Economics. New York, NY: North Holland (1988).
19. Jagannathan, R., and Z. Wang. "The Conditional CAPM and the Cross-Section of Expected Returns." Journal of Finance, 51 (1996), 3-53.
20. Jean, W. "Comparison of Moments and Stochastic Dominance Ranking Methods." Journal of Financial and Quantitative Analysis, 10 (1975), 151-161.
21. Jorion, P. Value at Risk. Burr Ridge, IL: Irwin (1997).
22. Kuosmanen, T. "Efficient Diversification According to Stochastic Dominance Criteria." Management Science, 50 (2004), 1390-1406.
23. Lettau, M., and X. Ludvigson. "Resurrecting the (C)CAPM: A Cross-Sectional Test When Risk Premia Are Time-Varying." Journal of Political Economy, 109 (2001), 1238-1287.
24. Levy, H. Stochastic Dominance. Boston-Dordrecht-London: Kluwer Academic (1998).
25. Lintner, J. "The Valuation of Risky Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets." Review of Economics and Statistics, 47 (1965), 13-37.
26. Magill, M., and M. Quinzii. Theory of Incomplete Markets, Vol. 1. Cambridge, MA: MIT Press (1996).
27. Markowitz, H. "Portfolio Selection." Journal of Finance, 7 (1952), 77-91.
28. Markowitz, H. Portfolio Selection. New York, NY: John Wiley & Sons (1959).
29. Mossin, J. "Equilibrium in a Capital Asset Market." Econometrica, 34 (1966), 768-783.
30. Ogryczak, W., and A. Ruszczynski. "From Stochastic Dominance to Mean-Risk Models: Semideviations as Risk Measures." European Journal of Operation Research, 116 (1999), 33-50.
31. Post, T. "Empirical Tests for Stochastic Dominance Efficiency." Journal of Finance, 58 (2003), 1905-1932.
32. Post, T., and P. van Vliet. "Empirical Tests of the Mean-semivariance CAPM." Working Paper, Erasmus University, Rotterdam (2005).
33. Price, K.; B. Price; and J. Nantell. "Variance and Lower Partial Moment Measures of Systematic Risk: Some Analytical and Empirical Results." Journal of Finance, 37 (1982), 843-855.
34. Reinganum, M. "A New Empirical Perspective on the CAPM." Journal of Financial and Quantitative Analysis, 16 (1981), 439-462.
35. Rockafellar, R., and S. Uryasev. "Conditional Value-at-Risk for General Loss Distributions." Journal of Banking and Finance, 26 (2002), 1443-1471.
36. Schmeidler, D. "Subjective Probability and Expected Utility without Additivity." Econometrica, 57 (1989), 571-587.
37. Sharpe, W. "Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk." Journal of Finance, 19 (1964), 425-442.
38. Tobin, J. "Liquidity Preference as Behaviour Towards Risk." Review of Economic Studies, 25 (1958). 65-86.
39. Unser, M. "Lower Partial Moments as Measures of Perceived Risk: An Experimental Study." Journal of Economic Psychology, 21 (2000), 253-280.
40. von Neumann, J., and O. Morgenstern. The Theory of Games and Economic Behavior. Princeton, NJ: Princeton University Press (1944).