It is well known in the finance literature that mean-variance analysis is inappropriate when asset returns are not normally distributed or investors’ preferences of returns are not characterized by quadratic functions. The normality assumption has been widely rejected in cases of emerging market equities and hedge funds. The mean-Gini framework is an attractive alternative as it is consistent with stochastic dominance rules regardless of the probability distributions of asset returns. Applying mean-Gini to a portfolio setting involving multiple assets, however, has always been challenging to business students whose training in optimization is limited. This paper introduces a simple spreadsheet-based approach to mean-Gini portfolio optimization, thus allowing the mean-Gini concepts to be covered more effectively in finance courses such as portfolio theory and investment analysis.
Cheung, C. Sherman; Kwan, Clarence C.; and Miu, Peter C. P.
"Mean-Gini Portfolio Analysis: A Pedagogic Illustration,"
Spreadsheets in Education (eJSiE):
2, Article 3.
Available at: http://epublications.bond.edu.au/ejsie/vol2/iss2/3