Mean-Variance vs. Full-Scale Optimization: Broad Evidence for the UK

Medientyp: E-Book

Titel: Mean-Variance vs. Full-Scale Optimization : Broad Evidence for the UK

Beteiligte: Hagströmer, Björn [Verfasser:in]; Anderson, Richard G. [Sonstige Person, Familie und Körperschaft]; Binner, Jane M. [Sonstige Person, Familie und Körperschaft]; Elger, Thomas [Sonstige Person, Familie und Körperschaft]; Nilsson, Birger [Sonstige Person, Familie und Körperschaft]

Erschienen: [S.l.]: SSRN, [2008]

Umfang: 1 Online-Ressource (32 p)

Sprache: Nicht zu entscheiden

DOI: 10.2139/ssrn.979811

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Anmerkungen: Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments May 2008 erstellt

Beschreibung: Portfolio choice by full-scale optimization applies the empirical return distribution to a parameterized utility function, and the maximum is found through numerical optimization. Using a portfolio choice setting of three UK equity indices we identify several utility functions featuring loss aversion and prospect theory, under which full-scale optimization is a substantially better approach than the mean-variance approach. As the equity indices have return distributions with small deviations from normality, the findings indicate much broader usefulness of full-scale optimization than has earlier been shown. The results hold in and out of sample, and the performance improvements are given in terms of utility as well as certainty equivalents

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