A Characterization of the SSD-Efficient Frontier of Portfolio Weights with an Application to SSD-Spanning

In this paper it is shown how the set of all portfolios which are second-order stochastic dominance efficient can be characterized by using a series of mixed-integer linear constrains. Our derivation employs a combination of the first-order conditions of the utility maximization problem together with a judicious use of binary variables. Our main result is illustrated by presenting a theoretical and empirical application, which tackles in a general way spanning and intersection in the context of SSD-efficiency