We examine the impact of adding either a VaR or a CVaR constraint to the mean-variance model when security returns are assumed to have a discrete distribution with finitely many jump points. Three main results are obtained. First, portfolios on the VaR-constrained boundary exhibit (K 2)-fund...

We consider consistent tests for stochastic dominance efficiency at any order of a given portfolio with respect to all possible portfolios constructed from a set of assets. We propose and justify approaches based on simulation and the block bootstrap to achieve valid inference in a time series...

In this paper, we analyze the implications arising from imposing a Conditional Value-at-Risk (CVaR)constraint in an agent's portfolio selection problem, and compare them with those arising from the imposition of a Value-at-Risk (VaR) constraint. For a given confidence level, a CVaR constraint is...

In a financial market with one riskless asset and n risky assets following geometric Brownian motions, we solve the problem of a pension fund maximizing the expected CRRA utility of its terminal wealth. By considering a stochastic death time for a subscriber, we solve a unique problem for both...

In this paper, we analyze the economic implications arising from imposing a Conditional Expected Loss (CEL) constraint in the portfolio selection problem of a fund manager, and compare them with those arising from the imposition of a Value-at-Risk (VaR) constraint. For a given confidence level...

We investigate, using the 2002 US Health and Retirement Study, individuals' insecurity and expectations about terrorism, and their effects on household financial decisions. We find that those without any military experience, the less educated, the more religious and females worry a lot about...

Motivated by existing evidence of a preference among investors for assets with lottery-like payoffs and that many investors are poorly diversified, we investigate the significance of extreme positive returns in the cross-sectional pricing of stocks. Portfolio-level analyses and firm-level...

We document and study international differences in both ownership and holdings of stocks, private businesses, homes, and mortgages among households aged fifty or more in thirteen countries, using new and comparable survey data. We employ counterfactual techniques to decompose observed...

This paper examines the returns to investment strategies based on the interactions between value-to-market indicators and corporate financing transactions that increase or decrease the firm's outstanding equity, i.e., equity issues and repurchases. Portfolio-level analyses and firm-level...

This paper examines the cross-sectional relation between idiosyncratic volatility and expected stock returns. The results indicate that (i) data frequency used to estimate idiosyncratic volatility, (ii) weighting scheme used to compute average portfolio returns, (iii) breakpoints utilized to...