Portfolio selection with limited downside risk Academic Article uri icon


  • A safety-first investor maximizes expected return subject to a downside risk constraint. Arzac and Bawa [Arzac, E.R., Bawa, V.S., 1977. Portfolio choice and equilibrium in capital markets with safety-first investors. Journal of Financial Economics 4, 277-288.] use the Value at Risk as the downside risk measure. The paper by Gourieroux, Laurent and Scaillet estimates the optimal safety-first portfolio by a kernel-based method, we exploit the fact that returns are fat-tailed, and propose a semi-parametric method for modeling tail events. We also analyze a portfolio containing the two stocks used by Gourieroux et al. and discuss the merits of the safety-first approach. 2000 Elsevier Science B.V.

published proceedings

  • Journal of Empirical Finance

author list (cited authors)

  • Jansen, D. W., Koedijk, K. G., & de Vries, C. G.

citation count

  • 69

complete list of authors

  • Jansen, Dennis W||Koedijk, Kees G||de Vries, Casper G

publication date

  • January 1, 2000 11:11 AM