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Portfolio Selection by the Axiom of Choice: Post Mean-Variance Analysis

K. Paul Yoon et al.

International Journal of Operations and Quantitative Management2021https://doi.org/10.46970/2021.26.4.4article
AJG 1ABDC C
Weight
0.37

What the paper says

Markowitz's proposition on the mean-variance efficient frontier laid the foundation for the modern portfolio evaluation theory. However, we cannot select the optimal portfolio from a pool of efficient portfolios unless an investor formulates an appropriate utility function. Utility functions are difficult even for experts to construct. Instead, we offer an alternative approach by creating a quasi-utility function according to the axiom of choice. This quasi-utility approach has a clear choice rationale that investors can comprehend easily, and asks for a very light computation burden. We illustrate two cases to demonstrate how closely the quasi-utility reflects an investor's attitude towards risk. The results are further contrasted with the traditional risk-adjusted performance measures to show the efficacy of the proposed approach.

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https://doi.org/https://doi.org/10.46970/2021.26.4.4

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@article{k.2021,
  title        = {{Portfolio Selection by the Axiom of Choice: Post Mean-Variance Analysis}},
  author       = {K. Paul Yoon et al.},
  journal      = {International Journal of Operations and Quantitative Management},
  year         = {2021},
  doi          = {https://doi.org/https://doi.org/10.46970/2021.26.4.4},
}

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Portfolio Selection by the Axiom of Choice: Post Mean-Variance Analysis

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Evidence weight

0.37

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.07 × 0.4 = 0.03
M · momentum0.80 × 0.15 = 0.12
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.