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Working paper
unige:102836 
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Spanning tests for markowitz stochastic dominance |
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| Authors | ||
| Year | 2018 | |
| Abstract | Using properties of the cdf of a random variable defined as a saddle-type point of a real valued continuous stochastic process, we derive first-order asymptotic properties of tests for stochastic spanning w.r.t. a stochastic dominance relation. First, we define the concept of Markowitz stochastic dominance spanning, and develop an analytical representation of the spanning property. Second, we construct a non-parametric test for spanning via the use of an empirical analogy. The method determines whether introducing new securities or relaxing investment constraints improves the invest- ment opportunity set of investors driven by Markowitz stochastic dominance. In an application to standard data sets of historical stock market returns, we reject mar- ket portfolio Markowitz efficiency as well as two-fund separation. Hence there exists evidence that equity management through base assets can outperform the market, for investors with Markowitz type preferences. | |
| Keywords | Saddle-Type Point — Markowitz Stochastic Dominance — Spanning Test — Linear and Mixed integer programming — Reverse S-shaped utility | |
| Full text | ||
| Structures | ||
| Research group | Geneva Finance Research Institute (GFRI) | |
| Citation (ISO format) | ARVANITIS, Stelios, SCAILLET, Olivier, TOPALOGLOU, Nikolas. Spanning tests for markowitz stochastic dominance. 2018 https://archive-ouverte.unige.ch/unige:102836 |
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