Making inefficient market indices efficient.

Clark, Ephraim A. and Jokung, Octave and Kassimitis, Konstantinos (2011) Making inefficient market indices efficient. European Journal of Operational Research, 209 (1). pp. 83-93. ISSN 0377-2217

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Official URL: http://dx.doi.org/10.1016/j.ejor.2010.09.013

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Abstract

This paper uses the concept of Marginal Conditional Stochastic Dominance and a generalization of the 50% Portfolio Rule to develop a tractable and parsimonious methodology for constructing a second degree Stochastic Dominance (SSD) efficient portfolio from a given, inefficient index. Because the SSD approach considers the entire probability distributions of asset returns, the resulting portfolios are efficient with respect to all risk-averse, utility-maximizing investors regardless of the form of their utility functions or the distributions of asset returns.

Item Type:Article
Research Areas:Middlesex University Schools and Centres > Business School > Accounting and Finance
Citations on ISI Web of Science:2
ID Code:6981
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Deposited On:04 Feb 2011 06:08
Last Modified:10 Dec 2014 20:29

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