Central moments, stochastic dominance, moment rule, and diversification with an application

Chan, Raymond H.; Chow, Sheung-Chi; Guo, Xu; Wong, Wing‐Keung

doi:10.1016/j.chaos.2022.112251

Cited by 4 publications

(2 citation statements)

References 73 publications

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“…Is it possible that combinations of portfolios with no arbitrage opportunity could generate portfolios that could have expected arbitrage opportunity? As far as we know, theories in the literature [ [12] , [13] , [14] , [15] , [16] , [17] , [18] ], including the theory of stochastic dominance (SD), only find that combinations of portfolios with no arbitrage opportunity could generate portfolios that could enable investors to obtain higher expected utility but could not generate portfolio that have expected arbitrage opportunity. In this paper, we conjecture that it is possible that combinations of portfolios with no arbitrage opportunity could generate portfolios that could generate portfolios that could have expected arbitrage opportunity.…”

Section: Introductionmentioning

confidence: 99%

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New trading strategy in investment and a new anomaly: A study of the hedge funds from emerging and developed markets

Wong,

Cheong,

Chui

et al. 2023

Heliyon

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Section: Introductionmentioning

confidence: 99%

“…Readers may read such examples in Refs. [ [17] , [18] , [19] ]. Thus, the stochastic dominance approach is superior to any of these measures and our paper uses the stochastic dominance approach in the comparison.…”

Section: Introductionmentioning

confidence: 99%

New trading strategy in investment and a new anomaly: A study of the hedge funds from emerging and developed markets

Wong,

Cheong,

Chui

et al. 2023

Heliyon

Self Cite

View full text Add to dashboard Cite

What is an Optimal Allocation in Hong Kong Stock, Real Estate, and Money Markets: An Individual Asset, Efficient Frontier Portfolios, or a Naïve Portfolio? Is This a New Financial Anomaly?

Tsang

Wagner

et al. 2022

Emerging Markets Finance and Trade

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The Mean-Variance Rule for Investors with Reverse S-Shaped Utility

Wong

Yeung

2022

Ann. Finan. Econ.

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Our paper contributes to the literature by developing the theory of the mean-variance (MV) rules for investors with reverse S-shaped utility. To do so, we first introduce the definition of the MV rule for investors with reverse S-shaped utility. We then set up the conjecture on the preference for different prospects by using the new MV rule that they could get a higher expected utility for the preferred asset under some conditions. Thereafter, we look for the conditions that the conjecture could hold and construct a theorem for this purpose by showing that when the negative (positive) parts of the assets follow one (another) type of location-scale family or the linear combination of location-scale families, then the preferences of the assets is the same as those by using an expected utility for the investors with reverse S-shaped utility. We then extend the theory by developing some properties of portfolio diversification by using the new MV rule. The theory developed in our paper enables academics and practitioners to apply the theory developed in this paper to analyze some important empirical issues and draw inferences on the preferences of investors with reverse S-shaped utility.

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Central moments, stochastic dominance, moment rule, and diversification with an application

Cited by 4 publications

References 73 publications

New trading strategy in investment and a new anomaly: A study of the hedge funds from emerging and developed markets

New trading strategy in investment and a new anomaly: A study of the hedge funds from emerging and developed markets

What is an Optimal Allocation in Hong Kong Stock, Real Estate, and Money Markets: An Individual Asset, Efficient Frontier Portfolios, or a Naïve Portfolio? Is This a New Financial Anomaly?

The Mean-Variance Rule for Investors with Reverse S-Shaped Utility

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