The Impact of Sampling Errors on the Choice of Portfolio Efficiency Analysis Rules with Borrowing and Lending of a Riskless Asset

Robert Brooks () and Yoram Kroll

The Financial Review, 1995, vol. 30, issue 4, 663-83

Abstract: This paper evaluates the impact of sampling errors on portfolio decisions using mean-variance and stochastic dominance rules where riskless borrowing and lending opportunities exist. The paper establishes criteria for comparing the alternative decision rules (for example, mean variance versus stochastic dominance) according to their effectiveness and the cost (in sampling error terms). Normal distributions are simulated using various assumed means, standard deviations, correlations, and sample sizes. These simulations enable one to evaluate the impact of sampling errors on the potential effectiveness of the empirical stochastic dominance and mean variance rules that include borrowing and lending of a riskless asset. Copyright 1995 by MIT Press.

Date: 1995
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Persistent link: https://EconPapers.repec.org/RePEc:bla:finrev:v:30:y:1995:i:4:p:663-83

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