Downside Loss Aversion and Portfolio Management
Downside Loss Aversion and Portfolio Management
复制标题
DOI:
10.1287/mnsc.1050.0486
复制
发表时间:
2006-04
期刊:
影响因子:
--
通讯作者:
R. Jarrow;Feng Zhao
中科院分区:
文献类型:
--
作者:
R. Jarrow;Feng Zhao
Downside loss-averse preferences have seen a resurgence in the portfolio management literature. This is due to the increasing use of derivatives in managing equity portfolios and the increased use of quantitative techniques for bond portfolio management. We employ the lower partial moment as a risk measure for downside loss aversion and compare mean-variance (M-V) and mean-lower partial moment (M-LPM) optimal portfolios under nonnormal asset return distributions. When asset returns are nearly normally distributed, there is little difference between the optimal M-V and M-LPM portfolios. When asset returns are nonnormal with large left tails, we document significant differences in M-V and M-LPM optimal portfolios. This observation is consistent with industry usage of M-V theory for equity portfolios but not for fixed-income portfolios.