Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/87002
Authors: 
Lizyayev, Andrey
Year of Publication: 
2010
Series/Report no.: 
Tinbergen Institute Discussion Paper 10-084/2
Abstract: 
For more than three decades, empirical analysis of stochastic dominance was restricted to settings with mutually exclusive choice alternatives. In recent years, a number of methods for testing efficiency of diversified portfolios have emerged, which can be classified into three main categories: 1) majorization, 2) revealed preference and 3) distribution-based approaches. Unfortunately, some of these schools of thought are developing independently, with little interaction or crossreferencing among them. Moreover, the methods differ in terms of their objectives, the information content of the results and their computational complexity. As a result, the relative merits of alternative approaches are difficult to compare. This paper presents the first systematic review of all three approaches in a unified methodological framework. We examine the main developments in this emerging literature, critically evaluating the advantages and disadvantages of the alternative approaches. We also point out some misleading arguments and propose corrections and improvements to some of the methods considered.
Subjects: 
Stochastic Dominance
Efficient Portfolios
Diversification
Algorithms
JEL: 
G11
G15
Document Type: 
Working Paper

Files in This Item:
File
Size
187.43 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.