Orthogonal Subgroups for Portfolio Choice

David Hennessy

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: The orthogonal group on the location-scale family is at the foundation of the stochastic structure underlying CAPM. Relaxing that assumption, we show how less restrictive matrix subgroup symmetries on the location-scale family of asset returns bound asset choices. Sign symmetry is a special case and provides conditions such that the investor does not sell short. Group-generated welfare orderings are also identified.

Date: 2004-01-01
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Published in Economics Bulletin, January 2004, vol. 7, pp. 1-7

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