Benchmark Beating with the Increasing Convex Order

2023/11/03 by Xia, Jianming
#FOS: Economics and business #Mathematical Finance (q-fin.MF) #Portfolio Management (q-fin.PM)

paper · doi:10.48550/arxiv.2311.01692

Abstract

In this paper we model benchmark beating with the increasing convex order (ICX order). The mean constraint in the mean-variance theory of portfolio selection can be regarded as beating a constant. We then investigate the problem of minimizing the variance of a portfolio with ICX order constraints, based on which we also study the problem of beating-performance-variance efficient portfolios. The optimal and efficient portfolios are all worked out in closed form for complete markets.

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