Author/Authors :
Mehrjoo، Sh نويسنده Department of Industrial Management, Islamic Azad University, Qazvin Branch, Qazvin, Iran Mehrjoo, Sh , Jasemi، M نويسنده Department of Industrial Engineering, K.N.Toosi University of Technology, Tehran, Iran Jasemi, M , Mahmoudi، A نويسنده Department of Industrial Engineering and Quality Assurance, Dehkhoda Sugarcane Agro Industry co, Ahvaz, Iran Mahmoudi, A
Abstract :
In this paper, after reviewing the concept of Efficient Frontier (EF), an important inadequacy of the Variance
based models for deriving EFs and the high necessity for applying another risk measure is exemplified. To
meet the challenge, the traditional risk measure of Variance is replaced with Lower Partial Moment (LPM)
of the first order. Because of the particular shape of the new risk measure, one part of the paper is devoted to
a methodology for deriving EF on the basis of the new model. Then the model superiority over the old one is
shown and finally shape of the new EFs under different situations is investigated. At last, it is concluded that
application of LPM of the first order in financial models in the phase of deriving EF is completely wise and
justifiable.
