Aggregation of downside risk and portfolio selection (Q6940372)
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scientific article; zbMATH DE number 8082693
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| English | Aggregation of downside risk and portfolio selection |
scientific article; zbMATH DE number 8082693 |
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Aggregation of downside risk and portfolio selection (English)
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19 August 2025
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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.
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portfolio theory
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choice under uncertainty
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below-target semideviation
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general deviation measures
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downside-risk analysis
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