Portfolio Separation with α-symmetric and Pseudo-isotropic Distributions
Nils Chr. Framstad
The shifted pseudo-isotropic multivariate distributions are shown to satisfy Ross' stochastic dominance criterion for two-fund monetary separation in the case with risk-free investment opportunity, and furthermore to admit CAPM under Lα-norm symmetry if α > 1. With no risk-free investment opportunity, the α = 1+1/(2d-1)-norm symmetric cases (any d ∈ N), are shown to admit 2d-fund separation, generalizing the well-known elliptical case d = 1.
Both discrete-time and continuous-time dynamic models with intermediate consumption are covered.
[v2] February 2013 Memo-pdf
[v1] February 2011 Memo-pdf