Mean-Extended Gini Portfolios Personalized to the Investor’s Risk-Gain Profile

13 Pages Posted: 9 Jun 2011

See all articles by Marta Cardin

Marta Cardin

Ca Foscari University of Venice - Dipartimento di Economia

Bennet Eisenberg

Lehigh University - Industrial and Systems Engineering Department

Luisa Tibiletti

University of Turin - Department of Management

Date Written: June 8, 2011

Abstract

Since Shalit and Yitzhalit (1984) the Mean-Extended Gini (MEG) has been proposed as a workable alternative to the classical Markowitz mean-variance CAPM. Although MEG keeps under control the risk belonging to the left-tail of the return distribution, small attention is reserved to potential gains belonging to the return right-tail. A generalization of MEG able to select personalized optimal mean-risk and/or mean-gain portfolios is proposed. We give evidence that if the portfolio distributions are symmetrical and/or the investor has a moderate risk-gain profile, then the efficient mean-risk portfolio always coincides with the worst inefficient mean-gain portfolio. Vice versa, if we concern more realistic scenarios admitting the existence of asymmetrically distributed assets and/or investors with very defensive or very aggressive investment profiles, portfolios which are optimal under both criteria may exist.

Keywords: extended gini index, MEG, risk-aversion and gain-properness

JEL Classification: G10, G11, G12,G29

Suggested Citation

Cardin, Marta and Eisenberg, Bennet and Tibiletti, Luisa, Mean-Extended Gini Portfolios Personalized to the Investor’s Risk-Gain Profile (June 8, 2011). Available at SSRN: https://ssrn.com/abstract=1860354 or http://dx.doi.org/10.2139/ssrn.1860354

Marta Cardin (Contact Author)

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

Bennet Eisenberg

Lehigh University - Industrial and Systems Engineering Department ( email )

Harold S. Mohler Laboratory
200 West Packer Avenue
Bethlehem, PA 18015-1582
United States

Luisa Tibiletti

University of Turin - Department of Management ( email )

C.so Unione Sovietica, 218 bis
Turin, Turin 10100
Italy
39-11-670-6229 (Phone)
39-11-670-6238 (Fax)

HOME PAGE: http://www.management.unito.it/tibiletti

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