A Stochastic Dominance Approach to Spanning
We develop a Stochastic Dominance methodology to analyze if new assets expand the investment possibilities for rational nonsatiable and risk-averse investors. This methodology avoids the simplifying assumptions underlying the traditional mean-variance approach to spanning. The methodology is applied to analyze the stock market behavior of small firms in the month of January. Our findings suggest that the previously observed January effect is remarkably robust with respect to simplifying assumptions regarding the return distribution.
|Keywords||linear programming, portfolio evaluation, portfolio selection, spanning, stochastic dominance|
|Publisher||Erasmus Research Institute of Management (ERIM)|
Post, G.T.. (2002). A Stochastic Dominance Approach to Spanning (No. ERS-2002-01-F&A). Erasmus Research Institute of Management (ERIM). Retrieved from http://hdl.handle.net/1765/163