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Robustness in SSD portfolio efficiency testing

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Operations Research Proceedings 2011

Part of the book series: Operations Research Proceedings ((ORP))

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Abstract

This paper deals with portfolio efficiency testing with respect to secondorder stochastic dominance (SSD) criterion. These tests classify a given portfolio as efficient or inefficient and give some additional information for possible improvements. Unfortunately, these tests usually assumes discrete probability distribution of returns with equiprobable scenarios. Moreover, they can be very sensitive to the probability distribution. Therefore, [1] derived a SSD portfolio efficiency test for a general discrete distribution and its robust version allowing for changes in probabilities of the scenarios. However, these formulations are not suitable for numerical computations. Therefore, in this paper, the numerically tractable reformulations of these SSD efficiency tests are derived.

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References

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Author information

Authors and Affiliations

  1. Faculty of Mathematics and Physics, Department of Probability and Mathematical Statistics, Charles University in Prague, Sokolovská 83, 186 75, Prague 8, Czech Republic

    Miloš Kopa

Authors
  1. Miloš Kopa
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Correspondence to Miloš Kopa .

Editor information

Editors and Affiliations

  1. Institut für, Betriebswirtschaftslehre, Universität Zürich, Moussonstrasse, Zurich, 8044, Switzerland

    Diethard Klatte

  2. Inst. Operations Research, ETH Zürich, Rämistr. 101, Zürich, 8092, Switzerland

    Hans-Jakob Lüthi

  3. Institut für, Betriebswirtschaftslehre, Universität Zürich, Moussonstrasse 15, Zurich, 8044, Switzerland

    Karl Schmedders

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Kopa, M. (2012). Robustness in SSD portfolio efficiency testing. In: Klatte, D., Lüthi, HJ., Schmedders, K. (eds) Operations Research Proceedings 2011. Operations Research Proceedings. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-29210-1_84

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