A note on a minimax rule for portfolio selection and equilibrium price system

Zhu-wu, WU; Song, Xuefeng; Xu, Yingying; Liu, Kun

doi:10.1016/j.amc.2008.11.013

Cited by 6 publications

(8 citation statements)

References 21 publications

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“…However, unlike the present paper, in neither Deng et al (2005) nor Wu et al (2009) there is a truly closed-form result, and furthermore they do not study the impact of ambiguity aversion on equilibrium prices.…”

Section: Introductionmentioning

confidence: 65%

“…To the best of our knowledge, the present paper is one the few studies next to Deng et al (2005), Wu, Song, Xu, and Liu (2009) to incorporate ambiguity aversion in asset returns in an equilibrium framework. However, unlike the present paper, in neither Deng et al (2005) nor Wu et al (2009) there is a truly closed-form result, and furthermore they do not study the impact of ambiguity aversion on equilibrium prices.…”

Section: Introductionmentioning

confidence: 99%

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Equilibrium in an ambiguity-averse mean–variance investors market

Pınar

2014

European Journal of Operational Research

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a b s t r a c tIn a financial market composed of n risky assets and a riskless asset, where short sales are allowed and mean-variance investors can be ambiguity averse, i.e., diffident about mean return estimates where confidence is represented using ellipsoidal uncertainty sets, we derive a closed form portfolio rule based on a worst case max-min criterion. Then, in a market where all investors are ambiguity-averse mean-variance investors with access to given mean return and variance-covariance estimates, we investigate conditions regarding the existence of an equilibrium price system and give an explicit formula for the equilibrium prices. In addition to the usual equilibrium properties that continue to hold in our case, we show that the diffidence of investors in a homogeneously diffident (with bounded diffidence) mean-variance investors' market has a deflationary effect on equilibrium prices with respect to a pure mean-variance investors' market in equilibrium. Deflationary pressure on prices may also occur if one of the investors (in an ambiguity-neutral market) with no initial short position decides to adopt an ambiguity-averse attitude. We also establish a CAPM-like property that reduces to the classical CAPM in case all investors are ambiguity-neutral.

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Section: Introductionmentioning

confidence: 65%

Section: Introductionmentioning

confidence: 99%

Equilibrium in an ambiguity-averse mean–variance investors market

Pınar

2014

European Journal of Operational Research

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“…Lastly, we apply a continuous maximum entropy method to solve a robust portfolio model. The discrete maximum entropy algorithm in [6] can not be applied to the present problem, because the objective function is not differentiable when transaction costs and dividends are considered.…”

Section: Introductionmentioning

confidence: 99%

“…Steinbach [5] provided an extensive overview of the mean-risk framework. Wu et al [6] discussed a robust portfolio problem for the market with or without short sale restriction.…”

Section: Introductionmentioning

confidence: 99%

“…It should be pointed out that our model only concerns this error, which is the major factor of estimation risk in the mean-variance framework. Secondly, we consider more complicated market situations than those in [6], in which they did not take into account transaction costs and dividends. As a matter of fact, it is an important issue in reality for portfolio managers to choose investment strategies (see Mansini and Speranza [14], Best and Hlouskova [15], Lobo et al [16], Bertsimas and Lo [17]).…”

Section: Introductionmentioning

confidence: 99%

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A Maximum Entropy Method for a Robust Portfolio Problem

Zhu-wu

Jiang

et al. 2014

Entropy

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We propose a continuous maximum entropy method to investigate the robust optimal portfolio selection problem for the market with transaction costs and dividends. This robust model aims to maximize the worst-case portfolio return in the case that all of asset returns lie within some prescribed intervals. A numerical optimal solution to the problem is obtained by using a continuous maximum entropy method. Furthermore, some numerical experiments indicate that the robust model in this paper can result in better portfolio performance than a classical mean-variance model.

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Solving Portfolio Optimization Problems Using AMPL

Karakalidis

Sifaleras

2016

Operational Research in Business and Economics

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A note on a minimax rule for portfolio selection and equilibrium price system

Cited by 6 publications

References 21 publications

Equilibrium in an ambiguity-averse mean–variance investors market

Equilibrium in an ambiguity-averse mean–variance investors market

A Maximum Entropy Method for a Robust Portfolio Problem

Solving Portfolio Optimization Problems Using AMPL

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