@article{61cafc727394430a8848cc58c096a244,
title = "Gains from diversification on convex combinations: A majorization and stochastic dominance approach",
abstract = "By incorporating both majorization theory and stochastic dominance theory, this paper presents a general theory and a unifying framework for determining the diversification preferences of risk-averse investors and conditions under which they would unanimously judge a particular asset to be superior. In particular, we develop a theory for comparing the preferences of different convex combinations of assets that characterize a portfolio to give higher expected utility by second-order stochastic dominance. Our findings also provide an additional methodology for determining the second-order stochastic dominance efficient set.",
keywords = "Majorization, Stochastic dominance, Portfolio selection, Expected utility, Diversification",
author = "Martin Egozcue and Wing-Keung Wong",
note = "Funding Information: The authors are grateful to Professor Robert Graham Dyson and anonymous referees for substantive comments that have significantly improved this manuscript. The authors would also like to thank Professors Esfandiar Maasoumi, Harry M. Markowitz, and Franco Pellerey for valuable comments that have significantly improved this manuscript. Our deepest thanks also go to Professor Juan Dubra for his helpful comments and assistance with the paper. The second author would like to thank Professors Robert B. Miller and Howard E. Thompson for their continuous guidance and encouragement. This research is partially supported by grants from Universidad de la Republica del Uruguay and Hong Kong Baptist University. ",
year = "2010",
month = feb,
doi = "10.1016/j.ejor.2009.01.007",
language = "English",
volume = "200",
pages = "893--900",
journal = "European Journal of Operational Research",
issn = "0377-2217",
publisher = "Elsevier B.V.",
number = "3",
}