The Hansen Ratio in Mean-Variance Portfolio Theory

Arxiv preprint 2007.15980

11 Pages Posted: 10 Aug 2020 Last revised: 17 Aug 2020

See all articles by Aleš Černý

Aleš Černý

The Business School (formerly Cass), City, University of London

Date Written: July 31, 2020

Abstract

It is shown that the ratio between the mean and the L2-norm leads to a particularly parsimonious description of the mean-variance efficient frontier and the dual pricing kernel restrictions known as the Hansen-Jagannathan (HJ) bounds. Because this ratio has not appeared in economic theory previously, it seems appropriate to name it the Hansen ratio. The initial treatment of the mean-variance theory via the Hansen ratio is extended in two directions, to monotone mean-variance preferences and to arbitrary Hilbert space setting. A multi-period example with IID returns is also discussed.

Keywords: Hansen Ratio, Hansen-Jagannathan Inequality, Efficient Frontier, Monotone Mean-Variance Preference

JEL Classification: G11, G12, C02

Suggested Citation

Černý, Aleš, The Hansen Ratio in Mean-Variance Portfolio Theory (July 31, 2020). Arxiv preprint 2007.15980, Available at SSRN: https://ssrn.com/abstract=3664641 or http://dx.doi.org/10.2139/ssrn.3664641

Aleš Černý (Contact Author)

The Business School (formerly Cass), City, University of London ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
44
Abstract Views
224
PlumX Metrics