Making inefficient market indices efficient

Ephraim Clark, Octave Jokung and Konstantinos Kassimatis

European Journal of Operational Research, 2011, vol. 209, issue 1, 83-93

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.

Keywords: Finance; Investment; analysis; Stochastic; Dominance (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (25)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:209:y:2011:i:1:p:83-93

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