Duffy, Ken R. and Lobunets, Olena and Suhov, Yuri (2007) Loss aversion, large deviation preferences and optimal portfolio weights for some classes of return processes. Physica A: Statistical Mechanics and its Applications, 378 (2). pp. 408-422. ISSN 0378-4371
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Abstract
We propose a model of a loss averse investor who aims to maximize his expected wealth under certain constraints. The constraints are that he avoids, with high probability, incurring a (suitably dened) unacceptable loss. The methodology employed comes from the theory of large deviations. We explore a number of fundamental properties of the model and illustrate its desirable features. We demonstrate its utility by analyzing assets that follow some commonly used nancial return processes: Fractional Brownian Motion, Jump Diusion, Variance Gamma and Truncated Lévy.
Item Type: | Article |
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Keywords: | Portfolio selection; Loss averse investors; Large deviations approach; Hamilton Institute. |
Academic Unit: | Faculty of Science and Engineering > Experimental Physics Faculty of Science and Engineering > Research Institutes > Hamilton Institute Faculty of Science and Engineering > Mathematics and Statistics |
Item ID: | 1719 |
Identification Number: | https://doi.org/10.1016/j.physa.2006.11.079 |
Depositing User: | Hamilton Editor |
Date Deposited: | 07 Dec 2009 12:04 |
Journal or Publication Title: | Physica A: Statistical Mechanics and its Applications |
Publisher: | Elsevier BV, North-Holland |
Refereed: | Yes |
URI: | |
Use Licence: | This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here |
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