In Das et al. (2010), an agent divides his or her wealth among mental accounts that have different goals and optimal portfolios. While the moments of the distribution of asset returns are exogenous in their normative model, they are endogenous in our corresponding positive model. We obtain the...

In setting minimum capital requirements for trading portfolios, the Basel Committee on Banking Supervision (1996, 2011a, 2013) initially used Value-at-Risk (VaR), then both VaR and stressed VaR (SVaR), and most recently, stressed Conditional VaR (SCVaR). Accordingly, we examine the use of SCVaR...

In Das, Markowitz, Scheid, and Statman (2010), an investor divides his or her wealth among mental accounts with short selling being allowed. For each account, there is a unique goal and optimal portfolio. Our paper complements theirs by considering estimation risk. We theoretically characterize...

Das et al. (2010) develop an elegant framework where an investor selects portfolios within mental accounts but ends up holding an aggregate portfolio on the mean–variance frontier. This investor directly allocates the wealth in each account among available assets. In practice, however,...

Das et al. (2010) develop a model where an investor divides his or her wealth among mental accounts with motives such as retirement and bequest. Nevertheless, the investor ends up selecting portfolios within mental accounts and an aggregate portfolio that lie on the mean-variance frontier....

Active portfolio management often involves the objective of selecting a portfolio with minimum tracking error variance (TEV) for some expected gain in return over a benchmark. However, Roll (1992) shows that such portfolios are generally suboptimal because they do not belong to the mean-variance...

In this paper, we analyze the portfolio selection implications arising from imposing a value-at-risk (VaR) constraint on the mean-variance model, and compare them with those arising from the imposition of a conditional value-at-risk (CVaR) constraint. We show that for a given confidence level, a...