 Semivariance below the maximum: Assessing the performance of economic and financial prospectsOlivier Le Courtois and
Xia Xu
Post-Print from HAL Abstract: "This paper examines the ordering of economic and financial prospects using a rescaled semivariance below the maximum (SVBMax). This indicator is consistent with stochastic dominance (SD) until order three, but is distinct from any expected utility framework, both in terms of construction and in terms of economic implications, despite an apparent formal similarity with the quadratic expected utility framework. SVBMax is able to deal with economic puzzles such as the restaurant puzzle or Rabin's paradox. SVBMax also provides a consistent alternative performance measure to popular measures such as the Sharpe ratio, the Omega ratio, or lower partial moments with exogenous thresholds. Compared to almost stochastic dominance, SVBMax is devoid of the drawbacks associated with the determination of violation areas. SVBMax can also replace the Aumann-Serrano and Foster-Hart riskiness indicators, which do not conform to third order SD. Further, SVBMax can provide a way of reaching an optimal diversification of stock portfolios. Besides, we also show that SVBMax is consistent with mean-variance-skewness preferences." Keywords: Semivariance below the maximum; Stochastic dominance; DARA; Quasi-complete ranking; Utility function; Diversification (search for similar items in EconPapers) Published in Journal of Economic Behavior and Organization, 2023, 209, 185-199 p There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04325673 Access Statistics for this paper More papers in Post-Print from HAL |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.