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Title :Stochastic spanning
Creator :Arvanitis, Stelios
Hallam, Mark
Post, Thierry
Topaloglou, Nikolas
Contributor :Athens University of Economics and Business, Department of Economics (Issuing body)
Type :Text
Extent :30 pages
Language :en
Identifier :
Abstract :This study develops and implements methods for analyzing whether introducing new securities or relaxing investment constraints improves the investment opportunity set for risk averse investors. We develop a statistical test procedure for ‘stochastic spanning’ for two nested polyhedral portfolio sets based on subsampling and Linear Programming. The test is statistically consistent and asymptotically exact for a class of weakly dependent processes. Using this test, we accept market portfolio efficiency but reject two-fund separation in standard data sets of historical stock market returns. The divergence between the test results for the two hypotheses illustrates the role for higher-order moment risk in portfolio choice and challenges representative-investor models of capital market equilibrium.
Subject :portfolio choice
stochastic dominance
linear programming
asset pricing
Date Available :2017-03-15 11:39:05
Date Issued :2015
Date Submitted :2017-03-15 11:39:05
Access Rights :Free access
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File: Arvanitis_Hallam_Post_Topaloglou_2015.pdf

Type: application/pdf