Arbeitspapier
Stochastic spanning
This study develops and implements a theory and method for analyzing whether introducing new securities or relaxing investment constraints improves the investment opportunity set for risk averse investors. We develop a test procedure for 'stochastic spanning' for two nested polyhedral portfolio sets based on subsampling and Linear Programming. The procedure is statistically consistent and asymptotically exact for a class of weakly dependent processes. Using the stochastic spanning tests, we accept market portfolio efficiency but reject two-fund separation in standard data sets of historical stock market returns. The divergence between the results of the two tests illustrates the role for higher-order moment risk in portfolio choice and challenges representative-investor models of capital market equilibrium.
- Language
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Englisch
- Bibliographic citation
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Series: Working Paper ; No. 1505
- Classification
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Wirtschaft
Optimization Techniques; Programming Models; Dynamic Analysis
Criteria for Decision-Making under Risk and Uncertainty
Portfolio Choice; Investment Decisions
- Subject
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Portfolio choice
Stochastic Dominance
Spanning
Subsampling
Linear Programming
Asset Pricing
- Event
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Geistige Schöpfung
- (who)
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Arvanitis, Stelios
Hallam, Mark
Post, Thierry
- Event
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Veröffentlichung
- (who)
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Koç University-TÜSİAD Economic Research Forum (ERF)
- (where)
-
Istanbul
- (when)
-
2015
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Arvanitis, Stelios
- Hallam, Mark
- Post, Thierry
- Koç University-TÜSİAD Economic Research Forum (ERF)
Time of origin
- 2015
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Resolving the Spanning Puzzle in Macro-Finance Term Structure Models
Defining Rules in Cost Spanning Tree Problems Through the Canonical Form
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Functions of boundary spanning in context: A postcolonial, power-sensitive perspective
The topology of cross-border exposures: beyond the minimal spanning tree approach
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Stochastic volatility
Stochastic Dominance
Stochastic complementarity
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