The maximum geometric mean criterion: revisiting the Markowitz–Samuelson debate: survey and analysis

Haim Levy*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

By the Almost First-degree Stochastic Dominance (AFSD) rule, corresponding only to economically relevant preferences, for an infinite horizon the theoretical claim of both Markowitz and Samuelson is not intact. However, for the practically more relevant case of the long but finite horizon, with stocks-bonds portfolios, Markowitz empirically is right as we find that the MGM portfolio coincides with the optimal myopic portfolio for all risk aversion parameters α<1.7. For α≥1.7 the MGM portfolio dominates by AFSD rule all optimal myopic portfolios, as long as the investment horizon is 12–15 years or longer.

Original languageEnglish
JournalAnnals of Operations Research
DOIs
StateAccepted/In press - 2024

Bibliographical note

Publisher Copyright:
© The Author(s) 2024.

Keywords

  • Almost first-degree stochastic dominance (AFSD)
  • FSD-violation area
  • G11
  • Geometric mean
  • Myopic preference

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