Name
Abstract | ||
|---|---|---|
In this work we introduce a class of measures for evaluating the quality of financial positions based on their ability to achieve desired financial goals. In the spirit of Simon (Simon, H. A. 1959. Theories of decision-making in economics and behavioral science. Amer. Econom. Rev.49(3) 253--283), we call these measures satisficing measures and show that they are dual to classes of risk measures. This approach has the advantage that aspiration levels, either competing benchmarks or fixed targets, are often much more natural to specify than risk tolerance parameters. In addition, we propose a class of satisficing measures that reward diversification. Finding optimal portfolios for such satisficing measures is computationally tractable. Moreover, this class of satisficing measures has an ambiguity interpretation in terms of robust guarantees on the expected performance because the underlying distribution deviates from the investor's reference distribution. Finally, we show some promising results for our approach compared to traditional methods in a real-world portfolio problem against a competing benchmark. |
Year | DOI | Venue |
|---|---|---|
2009 | 10.1287/mnsc.1080.0929 | Management Science |
Keywords | Field | DocType |
portfolio optimization.,ambiguity interpretation,risk tolerance parameter,coherent risk measures,convex risk measures,satisficing measures,risk measures,risk measure,risky positions,aspiration levels,financial goal,underlying distribution deviate,reference distribution,satisflcing,financial position,satisficing measure,h. a,targets,competing benchmark,coherent risk measure,portfolio optimization,satisficing,behavioral science | Satisficing,Economics,Mathematical economics,Project portfolio management,Portfolio,Portfolio optimization,Risk management,Decision theory,Diversification (marketing strategy),Ambiguity | Journal |
Volume | Issue | ISSN |
55 | 1 | 0025-1909 |
Citations | PageRank | References |
26 | 1.40 | 10 |
Authors | ||
2 | ||
Name | Order | Citations | PageRank |
|---|---|---|---|
| David B. Brown | 1 | 712 | 50.42 |
| Melvyn Sim | 2 | 1909 | 117.68 |