Comment: "Safety First--An Expected Utility Principle"

Gressis, Nicolas; Remaley, William A.

doi:10.2307/2329736

Cited by 3 publications

(2 citation statements)

References 5 publications

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“…We are grateful for the opportunity which Professors Gressis and Remaley's Comment [1] has afforded us to clarify our analysis of the relationship between Both, the Hebrew University, Jerusalem.…”

Section: Haim Levy and Marshall Sarnat*mentioning

confidence: 98%

Reply: "Safety First--An Expected Utility Principle"

Levy¹,

Sarnat²

1974

The Journal of Financial and Quantitative Analysis

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Section: Haim Levy and Marshall Sarnat*mentioning

confidence: 98%

Reply: "Safety First--An Expected Utility Principle"

Levy¹,

Sarnat²

1974

The Journal of Financial and Quantitative Analysis

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“…Beyond Markowitz's (1952) [16] mean-variance methodology, the safety-first (SF) criteria, suggested originally by Roy (1952) [21] and then developed by Telser (1955) [23] and Kataoka (1963) [11], have been well-known in risky assets allocation. Economic implications of using these SF rules as well as comparison with other known criteria, such as expected utility maximization and stochastic dominance, for portfolio optimization can be seen, for example, in Pyle & Turnovsky (1970) [20], Levy & Sarnat (1972) [12], Gressis & Remaley (1974) [8], Bawa (1978) [1] and Ortobelli & Rachev (2001) [19]. However, until the global financial crises have 2704 YUANYAO DING AND ZUDI LU the SF rules been in the shadow of the Markowitz's theory.…”

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confidence: 99%

How's the performance of the optimized portfolios by safety-first rules: Theory with empirical comparisons

Ding¹,

Lu²

2020

Journal of Industrial &Amp; Management Optimization

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Safety-first (SF) rules have been increasingly useful in particular for construction of optimal portfolios related to pension and other social insurance funds. How's the performance of the optimal portfolios constructed by different SF rules is an interesting practical question but yet less investigated theoretically. In this paper, we therefore analytically investigate the properties of the risky portfolios constructed by the three popular SF rules, denoted by the RSF, TSF and KSF, which are suggested and developed by A. D. Roy, L. G. Telser and S. Kataoka, respectively. Using Sharpe ratio as a measure of portfolio performance, we theoretically derive that the performance of an optimal portfolio constructed by the KSF approach depends on an acceptable level of extreme risk tolerance. The unique solution where the performance of the KSF portfolio is the same as that of the other two SF portfolios is found. By this we interestingly find that except this special case, under the finite optimal portfolios existent, the KSF portfolio always dominates the TSF portfolio in terms of the Sharpe ratio. In addition, in some market scenarios, even when the RSF and TSF portfolios do not exist in finite forms, the KSF rule can still apply to get a finite optimal portfolio. Moreover, in comparison with the RSF rule, a series of finite KSF portfolios can be interestingly constructed with their Sharpe ratios approaching to the maximum Sharpe ratio, which however cannot be reached by any corresponding finite RSF portfolio. Numerical comparisons of these rules by using a set of real data are further empirically demonstrated.

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The diversification of currency loans: A comparison between safety-first and mean-variance criteria

Seppälä

1994

European Journal of Operational Research

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Comment: "Safety First--An Expected Utility Principle"

Cited by 3 publications

References 5 publications

Reply: "Safety First--An Expected Utility Principle"

Reply: "Safety First--An Expected Utility Principle"

How's the performance of the optimized portfolios by safety-first rules: Theory with empirical comparisons

The diversification of currency loans: A comparison between safety-first and mean-variance criteria

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