Choosing Investment Portfolios When the Returns Have Stable Distributions

W. T. Ziemba

Chapter 25 in Handbook of the Fundamentals of Financial Decision Making:In 2 Parts, 2013, pp 421-444 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This paper presents an efficient method for computing approximately optimal portfolios when the returns have symmetric stable distributions and there are many alternative investments. The procedure is valid, in particular, for independent investments and for multivariate investments of the classes introduced by Press and Samuelson. The algorithm is based on a two-stage decomposition of the problem and is analogous to the procedure developed by the author that is available for normally distributed investments utilizing Lintner's reformulation of Tobin's separation theorem…

Keywords: Financial Decision Making; Asset Pricing; Prospect Theory; Utility Theory; Risk Aversion; Static Portfolio Theory; Stochastic Dominance; Dynamic Modeling; Dynamic Portfolio Theory; Tactical Asset Allocation; Kelly Strategy; Capital Growth (search for similar items in EconPapers)
Date: 2013
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