Institute of Information Theory and Automation

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Publication details

Measuring of Second-order Stochastic Dominance Portfolio Efficiency

Journal Article

Kopa Miloš

serial: Kybernetika vol.46, 3 (2010), p. 488-500

research: CEZ:AV0Z10750506

project(s): GAP402/10/1610, GA ČR

keywords: stochastic dominance, stability, SSD porfolio efficiency

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abstract (eng):

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.


bocek: 2012-12-21 16:10