Portfolio response to a shift in a return distribution: Comment

Kais Dachraoui and Georges Dionne ()
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Kais Dachraoui: HEC Montreal, Canada Research Chair in Risk Management

No 98-8, Working Papers from HEC Montreal, Canada Research Chair in Risk Management

Abstract: In this paper we show how a shift in a return distribution affects the composition of an optimal portfolio in the case of one riskless asset and two risky assets. We obtain that, in general, such a shift modifies the composition of the mutual fund. We also show that the separating conditions presented in the finance literature for the setting of the optimal portfolios, are not robust to the comparative statics following distributional shifts if we want to obtain intuitive results. This conclusion contrasts with that of Mitchell and Douglass (1997) who limited their analysis to portfolios with risky assets. Our discussion applies to a first order shift (FSD) but the same result can be obtained for increases in risk.

Keywords: Portfolio risk; asset return; portfolio response; asset distribution shift; first order shift; increase in risk; second order shift (search for similar items in EconPapers)
JEL-codes: D80 (search for similar items in EconPapers)
Pages: 14 pages
Date: 1998-04-01
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Related works:
Working Paper: Portfolio response to a shift in a return distribution: comment (1998)
Working Paper: Portfolio Response to a Shift in a Return Distribution: Comment (1998)
Working Paper: Portfolio Response to a Shift in a Return Distribution: Comment (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:crcrmw:1998_008

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