Portfolio optimization with decreasing absolute risk aversion stochastic dominance constraints

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dc.contributor.authorJunová J.
dc.contributor.authorPost T.
dc.contributor.authorKopa M.
dc.date.accessioned2026-05-05T10:31:25Z
dc.date.issued2026
dc.description.abstractAn optimization method is developed for constructing investment portfolios which stochastically dominate a given benchmark for all decreasing absolute risk-averse investors, using Quadratic Programming. The method is applied to a standard data set of historical returns of equity industry portfolios. The proposed optimization method improves upon the performance of mean-variance optimization by tens to hundreds of basis points per annum out of sample, depending on whether short sales are allowed. The improvements critically depend on imposing the complex condition of Decreasing Absolute Risk Aversion in addition to the simpler conditions of global risk aversion and decreasing risk aversion. © 2026 Elsevier B.V.
dc.identifier.citationKopa M.; Post T.; Junová J. (2026). Portfolio optimization with decreasing absolute risk aversion stochastic dominance constraints. European Journal of Operational Research. https://doi.org/10.1016/j.ejor.2026.03.023
dc.identifier.doi10.1016/j.ejor.2026.03.023
dc.identifier.urihttps://doi.org/10.1016/j.ejor.2026.03.023
dc.identifier.urihttps://nur.nu.edu.kz/handle/123456789/18338
dc.languageen
dc.publisherNazarbayev University
dc.rightsAll rights reserved
dc.subjectStochastic dominance
dc.subjectQuadratic programming
dc.subjectPortfolio choice
dc.subjectDecreasing absolute risk aversion
dc.subjectActive investment strategies
dc.titlePortfolio optimization with decreasing absolute risk aversion stochastic dominance constraints
dc.typeArticle

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