A simple nonparametric approach to low-dimension, shortfall-based portfolio selection

M. Ryan Haley

Finance Research Letters, 2008, vol. 5, issue 3, 183-190

Abstract: This paper develops a simple, low-dimension portfolio selection rule based on minimizing the probability of realizing a return below some pre-determined benchmark or target rate. Unlike most shortfall-based methods, which employ approximations to the shortfall probability, this method operates directly on the complementary Heaviside function representation of the in-sample shortfall probability. Thus, no behavioral assumptions, other than the notion of shortfall minimization, enter the portfolio selection process.

Keywords: Discrete; optimization; Pruning; strategies; Safety; First; Heaviside; function (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:5:y:2008:i:3:p:183-190

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