Portfolio Generating Functions

20 Pages Posted: 19 Nov 1998

Date Written: June 2, 1998

Abstract

A general method is presented for constructing dynamic equity portfolios through the use of mathematical generating functions. The return on these functionally generated portfolios is related to the return on the market portfolio by a stochastic differential equation. Under appropriate conditions, this equation can be used to establish a dominance relationship between a functionally generated portfolio and the market portfolio.

Keywords: Portfolio generating function, diversity

JEL Classification: G11, C62

Suggested Citation

Fernholz, E. Robert Robert, Portfolio Generating Functions (June 2, 1998). Available at SSRN: https://ssrn.com/abstract=139549 or http://dx.doi.org/10.2139/ssrn.139549

E. Robert Robert Fernholz (Contact Author)

Allocation Strategies, LLC ( email )

1 Palmer Square
Princeton, NJ 08542
United States
609-497-0442 (Phone)
609-497-0441 (Fax)

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