Aggregation of downside risk and portfolio selection
The paper studies portfolio selection when risk is measured by a below-target deviation measure (\textit{downside risk}), where the benchmark rate corresponds to the safe return of the market. It establishes existence and uniqueness results for downside-efficient portfolios aggregating finitely many assets. The tractability of downside-efficient portfolios allows for a risk analysis that parallels classical mean-variance analysis, with corresponding notions of efficient frontier, tangency portfolio, and Sortino ratio. The theoretical analysis is complemented by numerical illustrations based on Monte Carlo simulations.
- A NOTE ON SEMIVARIANCE
- A well-conditioned estimator for large-dimensional covariance matrices
- Coherent measures of risk
- Computation of mean-semivariance efficient sets by the critical line algorithm
- Convex Analysis
- Downside Loss Aversion and Portfolio Management
- Drawdown beta and portfolio optimization
- Generalized deviations in risk analysis
- Mean-expectile portfolio selection
- Mean-variance analysis and the modified market portfolio
- Mean‐ portfolio selection and ‐arbitrage for coherent risk measures
- Measures, Integrals and Martingales
- Optimality conditions in portfolio analysis with general deviation measures
- Risk concentration and the mean-expected shortfall criterion
- Surplus-invariant risk measures
- The two-fund separation theorem revisited
- Variance vs downside risk: Is there really that much difference?
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