Characterizing Efficient Portfolios

23 Pages Posted: 28 Jan 2002  

Shlomo Yitzhaki

Hebrew University of Jerusalem - Department of Economics; National Bureau of Economic Research (NBER)

Joram Mayshar

Hebrew University of Jerusalem - Department of Economics

Date Written: December 2001

Abstract

We provide here a necessary and sufficient operational condition for determining whether a given portfolio is efficient in the sense of second-degree stochastic Dominance (SSD). This condition also enables one to find a direction for improving on an inefficient portfolio, in the sense that all risk averse investors would weakly prefer that change in the portfolio composition. This condition can be applied among others to resolve questions that have long been posed in the literature, concerning on whether the portfolios that are promoted by portfolio managers are in fact efficient in the above sense.

Keywords: Stochastic Dominance, Optimal Portfolio, Efficient Portfolio

JEL Classification: G11

Suggested Citation

Yitzhaki, Shlomo and Mayshar, Joram, Characterizing Efficient Portfolios (December 2001). Available at SSRN: https://ssrn.com/abstract=297899 or http://dx.doi.org/10.2139/ssrn.297899

Shlomo Yitzhaki (Contact Author)

Hebrew University of Jerusalem - Department of Economics ( email )

Mount Scopus
Jerusalem, 91905
Israel
+972 2 659 2201 (Phone)
+972 2 652 2319 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Joram Mayshar

Hebrew University of Jerusalem - Department of Economics ( email )

Mount Scopus
Jerusalem, 91905
Israel
+972 02-5883138 (Phone)
+972 02-5816071 (Fax)

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