Optimal Financial Portfolios via Majorization: The Static Case

1st Festival for New Economic Thinking (INET), Edinburgh, UK

Posted: 19 Jul 2016 Last revised: 16 Apr 2018

Vilimir Yordanov

Independent

Date Written: July 17, 2016

Abstract

We provide a novel methodology for constructing optimal portfolios of financial assets that goes beyond the standard Markowitz and CAPM settings. Under general second order stochastic dominance we point out how via majorization techniques the efficient frontier can be constructed. For the purpose we employ classical Lorenz curves and investigate their stability properties. The results provide direct industry applications.

Keywords: portfolio theory, CAPM, Lorenz Curve, majorization, dependence

JEL Classification: G14, G15

Suggested Citation

Yordanov, Vilimir, Optimal Financial Portfolios via Majorization: The Static Case (July 17, 2016). 1st Festival for New Economic Thinking (INET), Edinburgh, UK. Available at SSRN: https://ssrn.com/abstract=2810735

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