NDLI: Gaussian and logistic adaptations of smoothed safety first

Content Provider	Springer Nature Link
Author	Haley, M. Ryan
Copyright Year	2013
Abstract	In one model of portfolio choice, dating to the Safety First principle, the investor is assumed to select assets to minimize the probability of realizing a portfolio return below some pre-determined target or benchmark rate of return. This paper builds on a recent refinement of Safety First—Smoothed Safety First—but is distinct in that it uses Gaussian and logistic distributions instead of the extreme value type-I distribution. Empirical and simulation results suggest that these alternative smoothing functions perform very much like the original formulation, suggesting that smoothing is robust to the choice of smoothing function for suitably large samples. For smaller samples, both Smoothed Safety First and the standard normal-based smoothing function appear to deliver portfolios with slightly smaller shortfall probabilities than the logistic-based approach.
Starting Page	333
Ending Page	345
Page Count	13
File Format	PDF
ISSN	16142446
Journal	Annals of Finance
Volume Number	10
Issue Number	2
e-ISSN	16142454
Language	English
Publisher	Springer Berlin Heidelberg
Publisher Date	2013-05-19
Publisher Place	Berlin, Heidelberg
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Semi-parametric smoothing Portfolio selection Heaviside function Safety first Finance/Investment/Banking Macroeconomics/Monetary Economics Quantitative Finance
Content Type	Text
Resource Type	Article
Subject	Finance

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Gaussian and logistic adaptations of smoothed safety first