Quantile Maximizing Safety-First Investors: Separation, Performance Measurement and Capital Market Equilibrium

Albrecht, Peter

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URL: https://ub-madoc.bib.uni-mannheim.de/32753
URN: urn:nbn:de:bsz:180-madoc-327532
Document Type: Working paper
Year of publication: 2012
The title of a journal, publication series: Mannheimer Manuskripte zu Risikotheorie, Portfolio Management und Versicherungswirtschaft
Volume: 187
Place of publication: Mannheim
Publication language: English
Institution: Außerfakultäre Einrichtungen > Institut für Versicherungswissenschaft
Business School > ABWL, Risikotheorie, Portfolio Management u. Versicherungswissenschaft (Albrecht 1989-2021)
MADOC publication series: Lehrstuhl für ABWL, Risikotheorie, Portfolio Management und Versicherungswirtschaft (Albrecht) > Mannheimer Manuskripte zu Risikotheorie, Portfolio Management und Versicherungswirtschaft
Subject: 330 Economics
Classification: JEL: G 11 , G 32,
Keywords (English): Safety-first , separation , capital market equilibrium , performance ratio , RORAC
Abstract: We combine the safety-first principle of Te lser (1955/56) and Arzac and Bawa (1977) with the principle of quantile maximization studied in Rostek (2010). While maintaining the short- fall constraint of the safety-first principle, we propose to maximize an upper quantile of the return distribution instead of maximizing its exp ected value. We study the implications of this new decision principle for portfolio selection and capital market equilibrium on one hand and for risk-adjusted performance measurement on the other hand.

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