Investors’ Behavior in Alternative Asset Classes

Ellie Papavasiliou (), Nikolas Topaloglou () and Georgios Tsomidis ()
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Ellie Papavasiliou: Athens University of Economics and Business
Nikolas Topaloglou: Athens University of Economics and Business
Georgios Tsomidis: Athens University of Economics and Business

SPOUDAI Journal of Economics and Business, 2022, vol. 72, issue 3-4, 3-55

Abstract: We investigate whether alternative asset classes should be included in optimal portfolios of the most prominent investor personae in the Behavioral Finance literature, namely, the Cumulative Prospect Theory, the Markowitz and the Loss Averse types of investors. We develop a stochastic spanning approach for each type of investor. Using the Stochastic Spanning criterion, we construct optimal portfolios with and without alternative assets, namely FX, Commodities, Real Estate and precious metals. Our out of sample comparative performance analysis indicates that investors impression of gains and losses affects significantly the composition and aggregate performance of optimal portfolios and that the alternative asset classes examined are attractive attracted under risk conditions.

Keywords: Parametric and Non-parametric tests; Second Order Stochastic Dominance; Stochastic; Spanning; Cumulative Prospect Theory; Loss Aversion; Markowitz Theory; Probability Weighting (search for similar items in EconPapers)
JEL-codes: C12 C13 C15 C44 D81 G11 G14 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spd:journl:v:72:y:2022:i:3-4:p:3-55

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