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Gini's Mean Difference and Portfolio Selection: An Empirical Evaluation

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  • Bey, Roger P.
  • Howe, Keith M.

Abstract

Yitzhaki [19] recently developed two portfolio selection criteria (EG and EΓ) based on the mean and Gini's mean difference. Similar to mean-variance(EV), the EG criterion uses two summary statistics to describe the probability distribution of a risky prospect, the mean and one-half Gini's mean difference. Gini's mean difference is defined as the average of the absolute differences between all possible pairs of observations of a random variable. Yitzhaki's development concentrated on the theoretical aspects of EG and EΓ and the theoretical relationships among EG, EΓ, EV, and stochastic dominance (SD) selection criteria. He did not address either the empirical properties of EG and EΓ or the relationship between the empirical efficient sets of EG and EΓ and other portfolio selection criteria. Yitzhaki suggested that the next step in the development and application of his proposed selection criteria should be an empirical investigation of how the EG and EΓ criteria compare with other selection criteria.

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  • Bey, Roger P. & Howe, Keith M., 1984. "Gini's Mean Difference and Portfolio Selection: An Empirical Evaluation," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 19(3), pages 329-338, September.
    • Handle: RePEc:cup:jfinqa:v:19:y:1984:i:03:p:329-338_02
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    Cited by:

    1. Adler Haymans Manurung & Nera Marinda Machdar & Jadongan Sijabat & Amran Manurung, 2024. "The Construction of a Portfolio Using Varying Methods and the Effects of Variables on Portfolio Return," International Journal of Economics and Financial Issues, Econjournals, vol. 14(1), pages 233-241, January.
    2. Darren Butterworth & Phil Holmes, 2005. "The Hedging Effectiveness of U.K. Stock Index Futures Contracts Using an Extended Mean Gini Approach: Evidence for the FTSE 100 and FTSE Mid250 Contracts," Multinational Finance Journal, Multinational Finance Journal, vol. 9(3-4), pages 131-160, September.
    3. Wetzstein, Michael E. & Szmedra, Philip I. & McClendon, Ronald W. & Edwards, David M., 1988. "Efficiency Criteria And Risk Aversion: An Empirical Evaluation," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 20(1), pages 1-8, July.
    4. Ran Ji & Miguel A. Lejeune & Srinivas Y. Prasad, 2017. "Properties, formulations, and algorithms for portfolio optimization using Mean-Gini criteria," Annals of Operations Research, Springer, vol. 248(1), pages 305-343, January.
    5. Shalit, Haim & Yitzhaki, Shlomo, 1985. "Evaluating the Mean-Gini Approach to Portfolio Selection," Working Papers 232632, Hebrew University of Jerusalem, Center for Agricultural Economic Research.
    6. Haim Shalit & Shlomo Yitzhaki, 2009. "Capital market equilibrium with heterogeneous investors," Quantitative Finance, Taylor & Francis Journals, vol. 9(6), pages 757-766.
    7. Haim Shalit & Shlomo Yitzhaki, 2005. "Capital Market Equilibrium: The Mean-Gini Approach," Working Papers 0522, Ben-Gurion University of the Negev, Department of Economics.
    8. Adler Haymans MANURUNG & Fadh Fauzi HIBATULLAH & Jadongan SIJABAT, 2023. "Stock Selection Using Roy Criteria to Construct a Portfolio and the Effects of Variables on Portfolio Return," Journal of Finance and Investment Analysis, SCIENPRESS Ltd, vol. 12(3), pages 1-2.

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